Simple question for shanek

[Malachi151]

Shanek, explain how wealth is created.

[Tony]

Thats neither simple nor a question.

[Jon_in_london]

Thats such a simple question, its beneath me!
:p ;)

[Lothian]

Originally posted by Malachi151
Shanek, explain how wealth is created. You take the letters in 'the law' and mix them up ?

[Malachi151]

I'm just waitng for shane's reply. He has gone on and on about how taxes rob money from the people who "create wealth", I want to see how he claims that wealth is created by these people, as this knowledge of his appears to be a core part of his economic beliefs.

So I'm waiting, how is wealth created shanek?

[Tmy]

God creates wealth!! ALL PRAISE JESUS!

(I knew that Advanced Economic Creationism class would come in handy someday)

[shanek]

Originally posted by Malachi151
Shanek, explain how wealth is created.

Wealth creation happens any time someone does work which either benefits someone or increases their quality of life. If you mow your own lawn, you're creating wealth by giving yourself a better-looking yard. But that creation comes at a price: the amount of work you do mowing your lawn, and the time it takes you to do it.

But what if you don't have a lawnmower? Or you don't know how to cut grass? Or you're disabled and can't cut it? Or you just don't want to? You would need the option of finding someone to cut your grass for you. But since they would be putting in the work and you would be gaining the benefit, there would need to be some amount of compensation from you to your employee that you both agree is equal to the amount of work he has done (from the employee's point of view) and the amount of benefit you get from having a nice-looking yard (from your point of view).

If you live alone on an island, you have to create all of your wealth yourself, like Tom Hanks in Cast Away (well, he had help from those FedEx boxes that washed up on shore). You have to build your own shelter, and catch and cook your own food, and that can be especially difficult if you don't know how to do either one. You're putting in a lot of work for very little wealth creation.

But put one more able-bodied person on the island with you, and things will get better. Not only will you have much-desired companionship, but you can now have an economy and a system of labor between you. So instead of each building his own shelter and getting his own food, you can work out an arrangement. One of you can get the food while the other builds and maintains the shelter. The reason why this works is because it takes less work overall for one person to gather food for two people than it does for the two people to gather food separately. Likewise with the shelter. Both people will have more food and better shelter with less work than if they had each tried to do their own thing.

You can also take advantage of differing skill sets—if one is better at getting food than the other, and the other is better at building shelter than the one, then divvying up the tasks is going to increase the benefits even more.

That's a very simple economy, and it works because the two people have the same needs. But once you get more and more people in the economy, things start to get complicated. Let's say we now have hundreds of people on the island, and they're all divided up into tribes. You can go out to a tribe and build and maintain their shelters in exchange for compensation for some kind. But what if they don't have anything you need? And what if another tribe has something you need, but already has their shelter needs taken care of? This is where the concept of money comes in. Money is just a resource that is somehow limited that can be used as a value exchange. It's usually thought of as gold or silver, although on a real island (called Yap) they carved big rocks into discs with holes in the middle and used them. It worked since they were hard to come by. Now you can go build the shelters for the first tribe and get compensated with money, then go to the second tribe and buy whatever it is you need from them.

With this many people and this many minds behind the economy, wealth will increase for everybody. They may only have to work a couple of hours a day to get the money for the things they need. Will they only work two hours a day and no more? Very likely, not. Once your needs are taken care of, you find yourself wanting an increase in the quality of life. It'd be living on the island to just take care of your needs, but it would also be quite boring. So maybe some people on the island will figure out a way to build musical instruments and learn how to play them, write some songs, and go around entertaining people in exchange for money. No one would have time to do that were it not for the creation of wealth that an economy brings.

I know this is kind of long; and it's really only scratching the surface. But it should give you the idea.

This kind of question is exactly why I think we need an Economics forum. This kind of thing would be perfectly at home there.

[Malachi151]

As I suspected, you have no idea. Wealth can only be reflected by material goods. Wealth is property. Wealth is created by mining, growting, collecting, creating. You cannot create wealth in a stock market, you don't create wealth by mowing a lawn.

Making money is not creating wealth. Cutting down trees and using them to build a house is creating wealth.

Essentially wealth represents resources.

The only way to create wealth is to produce material resources.

More on wealth and capitalism:

http://www.pcdf.org/1999/wealth.htm

[Tmy]

Originally posted by Malachi151
Wealth is created by mining, growting, collecting, creating. The only way to create wealth is to produce material resources.


http://www.pcdf.org/1999/wealth.htm

Hmmmm..............I created some "wealth" in the tiolet this morning.

[Victor Danilchenko]

malachi,

You are wrong. wealth is created each time there is a positive difference between cost and value of something -- and that something doesn't have to be material.

if you can perform X worth of labor and the result if worth 2*X to you, you create wealth. if you can sell the result for 3*X, you create welath. if i can buy something from you for 3*X but it's woth 5*X to me, we create welath. Wealth is created on the cusp of cost/value differential, just as electricity is created on the voltage differential, just as water flow is created on the potential energy inherent in the elevation or pressure differential.

It doesn't matter if the result is material, what matters is that it is valued at higher than production cost.

[rikzilla]

Originally posted by Malachi151
As I suspected, you have no idea.

Malachi,

You asked Shanek, then he provided a well thought out and detailed answer.

Now, I don't like Shanek, and I'm sure he thinks I'm a huge a-hole too, but you are wrong. His idea of what "wealth creation" means is at least as valid as yours.

-z

[Malachi151]

Originally posted by Victor Danilchenko
malachi,

You are wrong. wealth is created each time there is a positive difference between cost and value of something -- and that something doesn't have to be material.

if you can perform X worth of labor and the result if worth 2*X to you, you create wealth. if you can sell the result for 3*X, you create welath. if i can buy something from you for 3*X but it's woth 5*X to me, we create welath. Wealth is created on the cusp of cost/value differential, just as electricity is created on the voltage differential, just as water flow is created on the potential energy inherent in the elevation or pressure differential.

It doesn't matter if the result is material, what matters is that it is valued at higher than production cost.

Err wrong. Please submit any documentation that supports this.

[davefoc]

Malachi,
You ask an ambiguous, pseudoquestion to start this thread off.

Shanek, to his credit, chooses to take the question seriously and provide some insight into his thoughts on the issue.

Then you insult Shanek.

Then you provide your own limited definition of wealth and act like anybody that doesn't know what your limited definition of wealth is somehow flawed.

Then you provide a link to somebody bashing away at capitalism and free markets that doesn't show the slightest interest in providing an alternative beyond a suggestion that somehow communism is the answer to all our problems.

Do you see any problems with your approach here?

Somehow, and I can't imagine how with the huge body of empirical evidence to the contrary, you have decided that we would all be better off if we just transferred the control of wealth to some centralized body. You are so sure of this that you have lost any ability to understand the views of people that don't think this is such a good idea.

[Victor Danilchenko]

Malachi151

Err wrong. Please submit any documentation that supports this.How about you start by supporting your bizarre contention that 'Wealth can only be reflected by material goods'? The opinionated link you provided certainly does nothing to support such a contention, nor for that matter does it disagree with what I said.

Think about it, dude. Getting services -- which constitute value -- is creation of wealth. Sheer lunacy follows if you proclaim that only material goods can have economic value, OR if you proclaim that goods of economic value don't necessarily have an effect on wealth creation.

[shanek]

Originally posted by Malachi151
As I suspected, you have no idea.

:rolleyes:

I wrote PARAGRAPHS on it!!! And it's the exact same thing you'd learn in an economics class if you'd ever bother to take one.

Wealth can only be reflected by material goods.

Absolutely, totally, and completely untrue. Wealth is reflected in part by goods, but also by services and intangibles as I illustrated above.

Wealth is created by mining, growting, collecting, creating.

And what do you think the guys in my island example were doing?

You cannot create wealth in a stock market, you don't create wealth by mowing a lawn.

Untrue, untrue, untrue. Investing in the stock market invests in the companies who will use that value to create more wealth. Whether it's in higher profits, lower prices, higher wages, or a combination of all of these. And lawn care not only increases the quality of the land but also increases land value.

Making money is not creating wealth.

This is the first thing you've said right in this post. Money is just a means to an end, as I illustrated above. It's there so you don't have to find someone who both has what you need and needs what you have. It's an equalizer.

Cutting down trees and using them to build a house is creating wealth.

Provided that the value of the house is greater than the value of the trees, yes.

Essentially wealth represents resources.

No, wealth represents how efficiently the resources are being used. In my island example, all of the same resources were available at every stage. But I'm sure you'll agree that the island with prosperity and music and art etc. has the most wealth.

The only way to create wealth is to produce material resources.

No, you can also create wealth with services and other intangibles. It need not be material.

Read Whatever Happened to Penny Candy? by Richard J. Maybury.

[Ian Osborne]

Originally posted by Malachi151
Essentially wealth represents resources.

The only way to create wealth is to produce material resources.

What about intellectual property rights? If someone gave me the rights to produce and licence future products based on Lara Croft or Harry Potter but no rights or products that already existed, I'd be a very rich man. Even before I put those rights to use, my net worth would be millions. And that's without any goods or money changing hands.

[shanek]

BTW, in case anyone's curious, here's an example of Yappian currency:

http://www.janeresture.com/fedmic/yapmoney.jpg

A rock this size would represent the wealth of an entire village, if not more. Smaller rocks are used for smaller denominations of money. They vary anywhere from six inches to twelve feet around.

Bill Gates would have a hernia! :D

[Ian Osborne]

Originally posted by shanek
Bill Gates would have a hernia! :D

I'll be a stone mason...

[Malachi151]

I'm about to go out the door and don't have time for a fully reply. I'll get back to this later though.

When you mow someone's lawn and get paid that is not creation of wealth, that is a transfer of wealth in the form of money from one person to another. Transfer of wealth and creation of wealth are two separate things.

Also consider the ancient Egyptians for example. A pharaoh had a lot of gold and materials, and livestock, etc, but he never paid for it. That was all created by slaves. There was no exchange of goods and services, nothing was bought or sold. Would you not say though that the pharaoh was wealthy? Of course he possessed wealth. He was responsible for the creation of the wealth, the slaves created it, at his request and he possessed it.

What shanek is calling creation of wealth is only just transfer of wealth.

[shanek]

Originally posted by Malachi151
When you mow someone's lawn and get paid that is not creation of wealth, that is a transfer of wealth in the form of money from one person to another.

No, it isn't. Money ≠ wealth. Money is a unit of exchange. There is exactly as much money in the economy as there was before (albeit in different hands) yet there is one yard that looks a bit nicer. Hence, it's a creation of wealth.

If I just give you $20 because I like your face, that's not a creation of wealth. But if you provide a good or service in return, it is.

Likewise, stealing, taxation, and transfer payments (like Social Security payments) are NOT forms of wealth creation.

Also consider the ancient Egyptians for example. A pharaoh had a lot of gold and materials, and livestock, etc, but he never paid for it. That was all created by slaves. There was no exchange of goods and services, nothing was bought or sold.

And now you're displaying your complete ignorance of Egyptian history. Are you out to prove you have a dearth of knowledge in every single subject?

Although Egypt had slaves (as did every other civilization at the time), it is NOT true that they comprised the whole or even the majority of their workforce. In fact, most of them were workers who most certainly were compensated for their labor.

It's also not true that the Pharoahs had all of the wealth. In fact, one of the wealthiest Egyptians during the time of the Pharoahs was a commoner by the name of Imhotep who was a very clever architect—he invented the pyramid. He built Djoser's step pyramid and began Sekhemkhet's pyramid (which was never finished). One of the holy grails of archaeology is supposed to be the location of Imhotep's tomb, which archaeologists believe to be much grander than King Tut's or Ramesses's.

By inventing the pyramid, Imhotep certainly created wealth in the Egyptial civilization and was greatly rewarded for it.

What shanek is calling creation of wealth is only just transfer of wealth.

That's just bull$#!7, and everyone with a brain knows it. And I have already more than sufficiently explained why. You just refuse to hear, as usual.

[calladus]

Originally posted by Malachi151
As I suspected, you have no idea. Wealth can only be reflected by material goods. Wealth is property. Wealth is created by mining, growting, collecting, creating. You cannot create wealth in a stock market, you don't create wealth by mowing a lawn.

Making money is not creating wealth. Cutting down trees and using them to build a house is creating wealth.

Essentially wealth represents resources.

The only way to create wealth is to produce material resources.

More on wealth and capitalism:

http://www.pcdf.org/1999/wealth.htm

Labor isn't a resource?
Odd that the manufacturer I work for adds the cost of labor to the price of its consumer goods.

If I'm a songwriter, and you are a singer, we could get together and create a product for an audience that could make us both more wealthy than when we started.

No mines needed to be dug, no trees needed to be cut down.

[davefoc]

Malachi,
I appreciate the fact that you are going out and didn't have time to fully create a response.

However, please consider this. If my lawn is mowed, in my view I have more wealth than I did before it was mowed. So, at least to me, wealth has been created. Now you might say that somebody had to mow it so there was a reduction in his wealth. OK, fine. So then one has to look at the system as a whole to decide whether there was a net creation of wealth.

So you have a definition of wealth that precludes a mowed lawn as being seen as an increase in wealth, fine. Does your definition also preclude me from seeing the painting of my house as an increase in wealth to me? If I have somebody put a new roof on my house does your definition see that as an increase in wealth? Is my wealth increased by your definition if I get a new room added to my house? Frankly I am not sure I care about your definition of wealth.

If you want to make some argument about the advantages of the centralization of the control of wealth and you have a particular definition of wealth in mind, then I would suggest respectfully that you state what that definition is instead of asking shanek what his definition is and criticizing him when he fails to define wealth in the particular way you are looking for.

[davefoc]

Two responses came in while I was writing mine, so there was a little overlap.

I also wanted to add my agreement with Shanek with regards to Malachi's view of Egyptian history. The archeological evidence is pretty strongly against his notion that slaves were the primary builders of the pyramids.

What Malachi was repeating is just some ancient clap trap that was derived from a portion of the bible which consists of myths written down for propaganda purposes at least 500 years after the alleged events. There is zero corroboration for these events from either writings contemporary with the alleged events or any other form of archaeological evidence.

[Jon_in_london]

Originally posted by davefoc
However, please consider this. If my lawn is mowed, in my view I have more wealth than I did before it was mowed.

WTF!

OK, I think I see where you are coming from..

But Malachi is somewhat correct when he says that wealth is created by people making, creating, building new things.

We cannot get richer by mowing each others lawns.

I do not entirely belive in service economies, the UK economy is almost entirely service. The German economy is service AND industry- thats why they have more money than us.

[Jon_in_london]

How many of you lazy bums voted for my economics forum!!

[Malachi151]

This issue is really so simple.

Let's use an example of baking cookies.

Let's say that a woman bakes 50 cookies and puts then in a cookie jar. Those cookies represent wealth. She has a wealth of cookies.

Now a boy comes over to mow her lawn.

In payment for mowing the lawn she gives him 10 cookies.

Did the boy create cookies? No. He recieved cookies in payment.

There was a transfer of cookies, not a creation of cookies.

Now, what we can say is that this creates new demand for cookies and is a driving factor in the creation of new cookies, but the lawn boy does not create the wealth, the baker does.

Same with any other economy, be it a cookie economy or a money based economy.

Money simply changing hands is not creation of wealth.

Mowing a lawn is not creating wealth.

I also wanted to add my agreement with Shanek with regards to Malachi's view of Egyptian history. The archeological evidence is pretty strongly against his notion that slaves were the primary builders of the pyramids.

Did I mention building pyramids? No I didn't. Its beside the point anyway. Okay, change the example to the Spanish empire and all of the gold and treasures that they collected from the Natives. That was wealth that was brought to Spain and essentially Europe. It has nothing to do with buying and selling of goods. If you walk down the beach and you find a gold chain and you take posession of it, then you have obtained wealth. You didn't create wealth though, the wealth was created by whoever made the gold chain.

[Agammamon]

If the creation of material goods is the only measure of wealth then I guess all those tattoo parlors are just sucking away the prosperity of the country.

[Jon_in_london]

Originally posted by calladus

If I'm a songwriter, and you are a singer, we could get together and create a product for an audience that could make us both more wealthy than when we started.


The two of you can get wealthy but only by appealing to others to part with a portion of their wealth in return for your music.

Where did these other people get their wealth from?

[Malachi151]

Originally posted by Jon_in_london


The two of you can get wealthy but only by appealing to others to part with a portion of their wealth in return for your music.

Where did these other people get their wealth from?

Exactly, and this is what people don't get.

From dictionary.com:

(Econ.) (a) In the private sense, all property which has a money value. (b) In the public sense, all objects, esp. material objects, which have economic utility.

[Yahweh]

Wealth comes from hard work, wise investments, and occasionally a little luck. 'Nough said.

Edit to add: Education is also key to achieving wealth. Go to school, kids. If you dont, I dont get paid as much.

[shanek]

Originally posted by Jon_in_london
How many of you lazy bums voted for my economics forum!! :w2:

[shanek]

Originally posted by Malachi151
This issue is really so simple.

That must be why economists have debated it for centuries... :rolleyes:

Let's say that a woman bakes 50 cookies and puts then in a cookie jar. Those cookies represent wealth. She has a wealth of cookies.

Let's be clear: She has this because she was able to obtain the necessary resources (flour, sugar, etc.) and the necessary skills (cooking). She then used her cooking skills to put labor into the equation and came up with something that was more valuable to at least some people than the raw ingredients themselves.

Did the boy create cookies? No. He recieved cookies in payment.

There was a transfer of cookies, not a creation of cookies.

But you refuse to look at the other side of the equation! The boy used his skills and labor (lawn mowing) on an existing resource (the lawn) and made something that was more valuable to the lady (a nice-looking lawn vs. an unkempt lawn). Hence, the boy has created wealth just like the woman has!

Money simply changing hands is not creation of wealth.

Okay: so WHY did she give him the cookies? If she didn't think that what he did benefitted her, why give him anything?

Mowing a lawn is not creating wealth.

Yes, it is, and everyone here can see it except you.

Did I mention building pyramids? No I didn't. Its beside the point anyway.

No, it isn't. You said that Egypt was run on slave labor (wrong) and that the Pharoahs were the only ones with wealth (doubly wrong).

[Malachi151]

But you refuse to look at the other side of the equation! The boy used his skills and labor (lawn mowing) on an existing resource (the lawn) and made something that was more valuable to the lady (a nice-looking lawn vs. an unkempt lawn). Hence, the boy has created wealth just like the woman has!

No he didn't this is so bogus. He cut grass, he performed a service. Just use giving a massage for example, or a haircut, its all the same thing.

He has not created any wealth. He has recieved payment for a service performed. Wealth has been transfered from one person to another.

Okay: so WHY did she give him the cookies? If she didn't think that what he did benefitted her, why give him anything?

It did benefit her. It benefited her enough that she gave him part of the wealth that she had created.

The question at the root of all this is, "who creates wealth and how".

You, and many like you, say "our labor laws and taxed penalize the people that create wealth".

Well, who is creating wealth, adn how is wealth created? You have to know that first. What is wealth, and how is it created. Running a business or trading stock in the stock market is not nesseccarily creating wealth, well trading stocks definately is not.

No wealth is creating in the stock market, its only exchanged. The stock market can enable to creation of wealth by the companies, but when you make money from trading stock you are not creating wealth, you are taking wealth from other people.

No, it isn't. You said that Egypt was run on slave labor (wrong) and that the Pharoahs were the only ones with wealth (doubly wrong).

I never said either thing.

[Tormac]

Wouldn't it be fair to say that the cookie baker's labor added value to the ingredients, and thus wealth was created.

If that is so why would the labor of the lawn mower not also add value to the lawn, and thus also create wealth?

A house with a well manicured lawn would be worth more than the same house with a jungle growing in front of it, at least I would think so.


Maybe the term wealth needs to be defined to settle this.

[Drooper]

Might a humble economist make a contribution here.


First, some confusion of terms seems to creating problems.

Wealth is a term used by economists to refer to a stock of assets.

Income is a term used to refer to a flow.


The phrase "wealth creation" is more of a layman's term than something that has any fundamental economic meaning.

If pressed, an economist would probably say that wealth creation is a purely mechanical effect that comes from the accumulation of a flow of income. This would come from a basic intepretation of the words "wealth" and "creation".

Such an economist would also probably expand to suggest that in addition there could be a complimentary process of wealth appreication (or depreciation), where the marketable value of the wealth rises (or falls) over time.


So to look at the question again. "Wealth creation" is a simple mechanical process. In some of the examples above, in the split second between the transfer of cookies between the baker and the lawn mower, the wealth of the baker falls and the wealth of the lawn mower rises. (note that if the lawn mower then eats the cookies immediately his/her wealth then falls again due to consumption)


On the income side, Shanek et al are correct. The creation of income and its accumulation into wealth requires no physical resources. The process of value added, where the marketable price of output exceeds the marketable price of inputs creates a surplus, or income. None of he inputs or outputs needs to be physical.

[Tormac]

Malachi151 explained
No wealth is creating in the stock market, its only exchanged. The stock market can enable to creation of wealth by the companies, but when you make money from trading stock you are not creating wealth, you are taking wealth from other people.

I wanted to make sure I understand the scope of your statement Malachi. You are talking about the process of buying stocks only correct? Not any value that a stock might have gained because the company has increased its value, through say, manufacturing sandwich cookies?

If I understand you Malachi151, I agree that the transaction itself is a transfer of wealth, not a creation of it. However I would think that the wealth was created by the value that was added to the initial materials, whether in is my neighbor baking cookies, a neighborhood kid mowing the lawn, or Nabisco manufacturing Oreos. It would be hard to talk a grandson into mowing the lawn for a handful of flour, but steaming hot cookies might do it.

I would not spend my money on bags of wheat, coca, animal fat, and all the other stuff inside an Oreo, but I'd happily go buy a bag of cookies.

Or am I missing the point?

[Tormac]

Thanks for the clarification of "wealth" Drooper.

[Malachi151]

Originally posted by Drooper
Might a humble economist make a contribution here.


First, some confusion of terms seems to creating problems.

Wealth is a term used by economists to refer to a stock of assets.

Income is a term used to refer to a flow.


The phrase "wealth creation" is more of a layman's term than something that has any fundamental economic meaning.

If pressed, an economist would probably say that wealth creation is a purely mechanical effect that comes from the accumulation of a flow of income. This would come from a basic intepretation of the words "wealth" and "creation".

Such an economist would also probably expand to suggest that in addition there could be a complimentary process of wealth appreication (or depreciation), where the marketable value of the wealth rises (or falls) over time.


So to look at the question again. "Wealth creation" is a simple mechanical process. In some of the examples above, in the split second between the transfer of cookies between the baker and the lawn mower, the wealth of the baker falls and the wealth of the lawn mower rises. (note that if the lawn mower then eats the cookies immediately his/her wealth then falls again due to consumption)


On the income side, Shanek et al are correct. The creation of income and its accumulation into wealth requires no physical resources. The process of value added, where the marketable price of output exceeds the marketable price of inputs creates a surplus, or income. None of he inputs or outputs needs to be physical.

This still does not address the issue of "creation of wealth", or really, "creation of value".

Income is essentially meaningless in terms of defining value.

If a man walks up to me and gives me $1 million have I created wealth? No.

If a man walks up to me and I shine his shoes and he gives me $1 million have I created wealth? No.

If a man walks up to me and I sell him a car and he gives me $1 million have I created wealth? No.

Selling good or services is not creating wealth. Economic transactions are not a creation of wealth. Its just a transfer of wealth. Its just moving it around from one place to another.

In order to "create wealth" you have to create some material good.

Someone said to define wealth, I already did:

(Econ.) (a) In the private sense, all property which has a money value. (b) In the public sense, all objects, esp. material objects, which have economic utility.

[Malachi151]

Originally posted by Tormac
I wanted to make sure I understand the scope of your statement Malachi. You are talking about the process of buying stocks only correct? Not any value that a stock might have gained because the company has increased its value, through say, manufacturing sandwich cookies?


Well now we are getting into a different issue, which is the stock market.

This involves more major misconceptions. Stocks are just like baseball cards. They are a colectable item that is traded on a huge scale. The value of a stock is determined the exact same way that the value ofa baseball card is determined, simply by how much other people are willing to pay for it.

The company itself has no direct impact on the value of stocks. The only direct impact they have is in term sof dividends.

An issue of stock is a certificate of ownership of a certian percentage of of a company. However it does not entitle you to any material property of the company. So, its value is only determined by what other stock buyers will pay for it.

Its really silly when you ultimately get down to it, because all stockk is ultimately worthless. Its just the fact that we have agreed to play this little game because people can make money at it.

The company benefits becuase they recieve money from the initial sales of stocks. So when a compnay has an IPO or they issue new stock, they receive the money that is generated from the sale of that stock. After that they don't get money directly from the buying or sales of stock.

So again, its really just a giant baseball card trading club.

If a baseball player does well then his card rises in value, but its still just a worthless piece of paper, but people are willing to pay for it. Same with stocks. Now bonds are a different matter, bonds are "real" in that they are like IOUs. Stock is nothing, companies owe you nothing for your stock. They can take in millions of dollars in the sale of stock, and then close their doors and go home and walk away with the money. In fact that happened a lot in 2000 when the bubble burst with the internet companies.

So again, the value fo the stock is not directly related to the value of the company, its only related to the value it has in the stock market, which is purely whatever people will pay for it, just like baseball cards. The value of a company can drop andthe stock can go up, the value of the company can go up and the stock can drop. Its purely emotional with no grounding in real value. All stock is ultimatetly worthless.

[Tormac]

Malachi151 explained (about the stock market)

Its really silly when you ultimately get down to it, because all stockk is ultimately worthless. Its just the fact that we have agreed to play this little game because people can make money at it.

Hey, have you been looking at my stock portfolios? :)

I do have to ask when you wrote

So again, the value fo the stock is not directly related to the value of the company, its only related to the value it has in the stock market, which is purely whatever people will pay for it, just like baseball cards. The value of a company can drop andthe stock can go up, the value of the company can go up and the stock can drop. Its purely emotional with no grounding in real value. All stock is ultimatetly worthless.

I am comfortable with the notion that retail prices are not set by any intrinsic value, but by what the market will bear. But still, while the "value" of a company may not be directly related to the price of its stocks, is it not true that the perceived earning potential of a company has a lot to do with the value of a stock?

I agree that there are time when other market forces may be more powerful that the "value" of a company (say when there are rumors of a stock split, or a stock buy out, etc.), but over all, when a company has positive earnings, does that not tend to create a positive demand for the company's stock (and thus increase the price), and if a company is loosing money, does that not tend to decrease the demand for the company's stock? Are there not some foundations of economic behavior that are more than "purely emotional" ones?

[WildCat]

Malachi, there have been great strides made in economic theory in the last 150 or so years since Karl Marx. You really should avail yourself of a few economics courses in your local community college before you bombard the forum w/ your long-discredited mid-19th century economic theories.
Here's a clue as to how paying a neighbor kid $10 to mow your lawn creates wealth. While he's sweating out in the hot sun for an hour, you're hard at work at your job making widgets, for which you are paid $40. You have a net gain of $30 by paying the kid to mow your lawn and the kid makes $10, whereas if you left work early to mow the lawn yourself you'd lose the $40 and the kid would lose the $10.
Malachi, the cornerstone theory of economics is that there are unlimited wants for a limited amount of resources. This means that every action you take economically has a tradeoff.

[calladus]

Originally posted by Malachi151
This issue is really so simple.

Let's use an example of baking cookies.

Let's say that a woman bakes 50 cookies and puts then in a cookie jar. Those cookies represent wealth. She has a wealth of cookies.

Now a boy comes over to mow her lawn.

In payment for mowing the lawn she gives him 10 cookies.

Did the boy create cookies? No. He recieved cookies in payment.

There was a transfer of cookies, not a creation of cookies.

Now, what we can say is that this creates new demand for cookies and is a driving factor in the creation of new cookies, but the lawn boy does not create the wealth, the baker does.


Now I'm confused - according to your earlier posts, the baker CANNOT create wealth - she didn't grow the wheat, or raise the cattle to get the milk, or mine the salt for the cookies - she only TRANSFERRED her wealth to the grocery store in return for the cookie ingredients, and then transferred the cookies to the boy in return for a nice lawn.

The boy could have just worked for the grocery store and purchased all the cookie ingredients himself, possibly for less effort than it would have taken to get the cookies from the lady.

My point is that weath is created when you ADD VALUE to something. Growing and cutting down trees adds value to the original seedlings. Dressing the wood to turn it into lumber adds more value. Prospecting, mining, and smelting adds value to ore.

By transporting the various cookie ingredients from different parts of the country, the store adds value to these ingredients.

By baking, the woman adds value to the ingredients to make them more desirable to the boy.

By cutting the lawn, the boy adds value to the woman's yard. The boy's 'product' is a beautiful yard, and he is rewarded.

[Ricomise]

Using Malachi151's definition of wealth, and bearing in mind I am not an economist and certainly speaking in "laymen's terms,":

Someone said to define wealth, I already did:

(Econ.) (a) In the private sense, all property which has a money value. (b) In the public sense, all objects, esp. material objects, which have economic utility.

I have a question regarding the lawn-mower/cookie-baker example.

If the property owned by the baker was worth X dollars before the lawn mowing, and is worth 2X dollars after the mowing, has the total wealth under this definition increased? After all, it would be mathematically the same as if the lawn mower had given the baker another piece of land worth the same as the one she previously owned. (In return for the compensation of the cookies.)

Since all property which has value is wealth under the above definition (and it should be noted that it does not say "real property," so I assume intangible property would also fit), it seems to me that the question is, what was the total value of all property involved in the transaction?

The lawn was worth X dollars. If the cookies were also worth X dollars, then the transaction appears to be a wash as far as creation of wealth goes. (There was 2X dollars worth of wealth before the transaction and there is still 2X dollars worth of wealth after.) If the cookies are worth more than X dollars, there appears to have been a creation of wealth, as there is more total wealth in the "system" than there was previously. (Leaving out, of course, the cost of wear and tear on the lawn mower's equipment which may make that property less valuable.)

Of course, this assumes objective value for property. It seems to me that the cookies likely could have a value (monetary or otherwise) of X to the baker and 2X to mower. (Since the baker can easily make more, since she has more time to do so without having to mow the lawn, wheras the mower may not know how to make cookies, or not have time, since he's mowing the lawn.)

If this is the case, then, after the transaction, we have a lawn that used to be worth X and is now worth 2X, and cookies that used to be worth X and are now worth 2X. So the "value" of all "property" in the system pre-transaction was 2X and is now 4X.

Of course a scenario could be created where the total wealth is reduced, but I fail to see that this definition makes it impossible for wealth to have been created by the lawn mower.

[Malachi151]

I am comfortable with the notion that retail prices are not set by any intrinsic value, but by what the market will bear. But still, while the "value" of a company may not be directly related to the price of its stocks, is it not true that the perceived earning potential of a company has a lot to do with the value of a stock?

Yes it does, but that value comes from other buyers, not the company, just like if a baseball player has a great season the value of his cards may go up, and if he has a bad season they go down.

Malachi, there have been great strides made in economic theory in the last 150 or so years since Karl Marx. You really should avail yourself of a few economics courses in your local community college before you bombard the forum w/ your long-discredited mid-19th century economic theories.
Here's a clue as to how paying a neighbor kid $10 to mow your lawn creates wealth. While he's sweating out in the hot sun for an hour, you're hard at work at your job making widgets, for which you are paid $40. You have a net gain of $30 by paying the kid to mow your lawn and the kid makes $10, whereas if you left work early to mow the lawn yourself you'd lose the $40 and the kid would lose the $10.
Malachi, the cornerstone theory of economics is that there are unlimited wants for a limited amount of resources. This means that every action you take economically has a tradeoff.

I already said that this is true, in fact I pointed it out. I said that it can indirectly lead to the creation of wealth by supplying demand for the creation of new wealth to pay for goods and services.

Still, the lawn mower is not creating the wealth, and thats what this discussion is about, the technical actuality of exactly how wealth is created and the diference between creating wealth and exchanging wealth.

Now I'm confused - according to your earlier posts, the baker CANNOT create wealth - she didn't grow the wheat, or raise the cattle to get the milk, or mine the salt for the cookies - she only TRANSFERRED her wealth to the grocery store in return for the cookie ingredients, and then transferred the cookies to the boy in return for a nice lawn.

The boy could have just worked for the grocery store and purchased all the cookie ingredients himself, possibly for less effort than it would have taken to get the cookies from the lady.

You're making a simple example overly complex, but we can go that way too though.

Yes, you are correct the wealth is initially created by the earth, then it is collected by people. However when you make something new that is considered a new product and if there is value added then that is considered creation of wealth.

Then you get into a discussion of whether trimming the law is such an activity, and I say no, you are not creatig a material posession. Its arguable I suppose but I don't really care about that argument because it was just an example using shanek's example and his origional intent was discussing it as a service, not a transformation of property. If you want to get picky, just use a massage as an example of a fee for service.

I would be interested to see what a "real economist" had to say about it. The lawn grows back, so you are just doing the same thing over and over again. I would argue that you are not creating wealth each time, you are simply returning the law to a state of value. If you property is worth $10,000 when upcut, and you mow it for $10, it is then worth $10,010. When it grows back it is now worth $10,000, then you mow it and its now worth $10,010 again. The vlaue of the property does not go up each time. Thus you are not creating wealth each time by mowing it.

[davefoc]

The lawn grows back, so you are just doing the same thing over and over again

Malachi, I thought this might be the heart of your lawn mowing doesn't create wealth thought.

That is why I asked about whether painting a house creates wealth. The paint eventually wears away, so just like getting the lawn mowed this doesn't create wealth either I suppose because eventually you just have to paint it again.

So then what about building a new house. Eventually the house grows old and needs to be rebuilt, so once again no wealth created because you just have to do the same thing over again?

I stand by what I said earlier, you have a particular definition of wealth in mind that is somehow associated with a point you have yet to make. Great. There is nothing wrong with limiting the definition of something in a particular context to make a point. The problem here is that your only point seems to be to limit the defintion of a word without any particular purpose.

[Malachi151]

Originally posted by davefoc


Malachi, I thought this might be the heart of your lawn mowing doesn't create wealth thought.

That is why I asked about whether painting a house creates wealth. The paint eventually wears away, so just like getting the lawn mowed this doesn't create wealth either I suppose because eventually you just have to paint it again.

So then what about building a new house. Eventually the house grows old and needs to be rebuilt, so once again no wealth created because you just have to do the same thing over again?

I stand by what I said earlier, you have a particular definition of wealth in mind that is somehow associated with a point you have yet to make. Great. There is nothing wrong with limiting the definition of something in a particular context to make a point. The problem here is that your only point seems to be to limit the defintion of a word without any particular purpose.

No, its not the same, well sort of. If you paint a house then yes, value is added. As the paint fades then value is lost. If the house is valued at $50,000 unpainted, then you paint it and its $53,000, then you added $3,000 and created wealth. If it then fades and is worth only $50,000 again and you paint it again, then you are just returning it to it's previous value, so no you are not creating new wealth, you are just maintaining wealth. The value of the house is not increased.

Or you can see it as you are creating wealth each time, but you are also losing wealth, so the nest result is the same.

Same with rebuilding a house. You have a loss of value when the house goes bad, and then a regaining of value when it is rebuilt. If you count both the loss and the gain together then the wealth that is created is the difference between the two.

If you buy a piece of property for $10,000. You build a house on it for $50,000 so that together it is worth $60,000. The house burns down and you then rebuild it for $50,000 again. Is your property now worth $110,000? No, its still worth just $60,000. There is no value added.

[Grammatron]

If you buy a piece of property for $10,000. You build a house on it for $50,000 so that together it is worth $60,000. The house burns down and you then rebuild it for $50,000 again. Is your property now worth $110,000? No, its still worth just $60,000. There is no value added.

Yeah...that's not how reality works unless of course we are living in super simplified world.

When you buy a property at $10,000 and then spend $50,000 to put a house on it, the ending price will not be equal to $60,000. The price of the property will now also depend on mostly the location of it. If you build a house in the middle of nowhere with no road to get to it, I doubt anyone will want it for $20,000. However, put the same place in some desireable area like Malibu, CA or Beverly Hills and suddenly people are willing to pay $600,000 for the same thing.

[Malachi151]

Originally posted by Grammatron


Yeah...that's not how reality works unless of course we are living in super simplified world.

When you buy a property at $10,000 and then spend $50,000 to put a house on it, the ending price will not be equal to $60,000. The price of the property will now also depend on mostly the location of it. If you build a house in the middle of nowhere with no road to get to it, I doubt anyone will want it for $20,000. However, put the same place in some desireable area like Malibu, CA or Beverly Hills and suddenly people are willing to pay $600,000 for the same thing.

Yes but none of that has anything to do with the argument in question.

[Grammatron]

Originally posted by Malachi151


Yes but none of that has anything to do with the argument in question.


On the contrary, it has everything to do with it. The houses in Beverly Hills and similar places grew in value over time while still being the same structurally and location wise. So, the person who owned a house like that had his wealth grow with out adding anything onto the house. Which goes against your definition of wealth.

[shanek]

Originally posted by Malachi151
No he didn't this is so bogus. He cut grass, he performed a service. Just use giving a massage for example, or a haircut, its all the same thing.

And both create wealth.

He has not created any wealth. He has recieved payment for a service performed.

A service which created wealth.

Wealth has been transfered from one person to another.

No, it hasn't. There's the same amount of money, yet there's one nicer yard! That's creation of wealth!

It did benefit her.

THEN IT'S FSCKING WEALTH!!!!

It benefited her enough that she gave him part of the wealth that she had created.

IN EXCHANGE FOR THE WEALTH HE CREATED FOR HER!!!!!!!

How can you POSSIBLY be this dense???

Well, who is creating wealth, adn how is wealth created? You have to know that first.

I do know that! I've been trying to explain it to you the whole damn thread!!!

No wealth is creating in the stock market, its only exchanged.

In the stock market itself, yes. But what do you think the companies are going to do with the money? They're going to CREATE WEALTH! And don't you think that people are more likely to buy the stocks of companies that are potentially going to create the most wealth? That way they get the best return on their investments.

I never said either thing.

Liar. You said:

There was no exchange of goods and services, nothing was bought or sold.

Meaning that the pharoahs had all the gold, and slaves built everything. I proved you wrong! Now, be a man and admit it!

[shanek]

Originally posted by Tormac
Wouldn't it be fair to say that the cookie baker's labor added value to the ingredients, and thus wealth was created.

If that is so why would the labor of the lawn mower not also add value to the lawn, and thus also create wealth?

Precisely!

Maybe the term wealth needs to be defined to settle this.

That's what I did in my very first post.

[shanek]

Originally posted by Malachi151
If a man walks up to me and gives me $1 million have I created wealth? No.

Agreed.

If a man walks up to me and I shine his shoes and he gives me $1 million have I created wealth? No.

Yes, because you have greated greater value than you have destroyed. You destroyed a little bit of shoe polish and a little bit of wear and tear on your rag and brush. In return, you have increased the shininess of the person's shoes. If you both agree that the shininess of his shoes outweight the aforementioned destruction of resources, then wealth has indeed been created.

The monetary exchange is completely irrelevant. You could do it for $1 million, $1, or just do it for free out of the goodness of your heart. It's still a creation of wealth.

If a man walks up to me and I sell him a car and he gives me $1 million have I created wealth? No.

Where did you get the car? It had to be made from resources whose collective value does not total that of the car. If you sell the car new, you're a part of the process, and thus you are participating in wealth creation.

You could argue if you sell the car used, then you aren't creating wealth.

[davefoc]

Malachi said (items for mowing a lawn added in parenthesis)

......If you paint (mow) a house (lawn) then yes, value is added. As the paint (lawn) fades (grows) then value is lost. If the house is valued at $50,000 unpainted (unmowed), then you paint (mow) it and its worth $53,000 ($50,010), then you added $3,000 ($10) and created wealth. ....


I guess you now agree that mowing a lawn, like painting a house creates wealth. Now perhaps you could enlighten us with what your point is.

[shanek]

Originally posted by Malachi151
Stocks are just like baseball cards.

No, they aren't. Baseball cards are like a form of futures exchange, like gold, where you're considering whether the price of the baseball cards will rise or fall, but that's not based on anything the baseball card itself does. The card just sits there.

With stock, you're investing in the future of a company, which is going to actively create wealth in the economy in order to gain a profit and give the stockholders a return on their investments.

That's a pretty big difference!

The company itself has no direct impact on the value of stocks.

You are kidding, right? No, wait, I forgot how clueless you are...

The company itself has a huge impact on the value of the stocks. If the company does well, the value of the stocks increase because the company is now in bigger demand. Whereas if the company falters, so does the stock price.

Its really silly when you ultimately get down to it, because all stockk is ultimately worthless.

No, it isn't. Not only does it give you an ownership of some of the company's assets, most stocks also allow you to participate in decision-making. The more stocks you have, the more votes you have.

All stock is ultimatetly worthless.

By that logic, all money is basically worthless.

[shanek]

Originally posted by Ricomise
Of course, this assumes objective value for property. It seems to me that the cookies likely could have a value (monetary or otherwise) of X to the baker and 2X to mower. (Since the baker can easily make more, since she has more time to do so without having to mow the lawn, wheras the mower may not know how to make cookies, or not have time, since he's mowing the lawn.)

Well, it's all subjective. If the boy were diabetic, the cookies wouldn't be worth much to him at all. That goes back to what I said in my very first post, when the builder found a tribe who needed shelter but didn't have anything he wanted in return, but found another tribe who had what he wanted but didn't need the shelter. This is where money comes in.

Consider an auction. You're selling off an item and people are bidding. As the bidding goes up, fewer and fewer people bid because not as many people consider it to be worth the higher price. By selling to the highest bidder, you give it to the person who considers it to be of the highest value.

Of course a scenario could be created where the total wealth is reduced,

Easily. Despite the misconception that wars are good for the economy, what wealth they do create (in the form of guns and bombs and planes etc.) usually doesn't come anywhere close to what is destroyed when the bombs and guns are used.

[shanek]

Originally posted by Malachi151

Yes, you are correct the wealth is initially created by the earth, then it is collected by people. However when you make something new that is considered a new product and if there is value added then that is considered creation of wealth.

But isn't making a neat lawn out of an unkempt lawn the same thing?

Then you get into a discussion of whether trimming the law is such an activity, and I say no, you are not creatig a material posession.

A nice lawn isn't a possession?

How about if a young couple buys a fixer-upper for $40,000. They put a couple of years of work into making it a nice house and then sell it for $100,000. Have they not created wealth?

If you want to get picky, just use a massage as an example of a fee for service.

Isn't the good feeling you get from a massage, or by listening to music, or by watching a movie, of value to you? If so, then why wouldn't a masseuss or a musician or a filmmaker create wealth?

Go back to the musicians in my island scenario for an example of this.

The lawn grows back, so you are just doing the same thing over and over again.

So? Are you saying a lawn left alone for 20 years is worth as much as a nicely manicured lawn? Or would it be like the "fixer-upper" I mentioned above?

I would argue that you are not creating wealth each time, you are simply returning the law to a state of value. If you property is worth $10,000 when upcut, and you mow it for $10, it is then worth $10,010. When it grows back it is now worth $10,000, then you mow it and its now worth $10,010 again.

And if you hadn't cut it it would have been worth $9,990. I think you're shooting yourself in the foot with this argument.

The vlaue of the property does not go up each time.

You are preventing it from going down, though.

Thus you are not creating wealth each time by mowing it.

Yes, you are, because there is more wealth than there would have been if the lawn had remained uncut.

[shanek]

Originally posted by davefoc
The problem here is that your only point seems to be to limit the defintion of a word without any particular purpose.

He does have a purpose. In several other threads, I've used the creation of wealth to show how his ideas are ridiculous, so in order to defend them, he needs a ridiculous definition of "wealth."

That is his whole reason for starting this thread to begin with.

[WildCat]

Originally posted by Malachi151
Still, the lawn mower is not creating the wealth, and thats what this discussion is about, the technical actuality of exactly how wealth is created and the diference between creating wealth and exchanging wealth.
Malachi, you are looking at the problem as if all decisions occur in a vacuum. They don't, by deciding to do one thing (mow the lawn) you are necessarily deciding not to do something else (make widgets, relax w/ a book, play w/ the kids, etc.). All of these things have value, so if you decide that you'd rather play w/ the kids and pay the neighbor kid $10 you have created wealth because your time w/ the kids is worth more than $10 to you. In the real world, only the government transfers wealth, and only private entities can create it. Yet you seem to be in favor of government control of the capital, which can not create wealth! Look again at my example of deciding to stay at work making widgets while paying the kid $10 to mow the grass - here you have made that decision for selfish (meaning your only immediate aim is to make the extra $30) reasons yet both parties have benefitted as the kid now makes $10. This is pure capitalism, and it is how capitalism creates wealth and also why Marxism cannot create wealth.

[shanek]

Originally posted by Malachi151
Or you can see it as you are creating wealth each time, but you are also losing wealth, so the nest result is the same.

You haven't been talking about a net result! We've been discussing whether or not a particular action creates wealth—and since the act of painting the house is not the action that caused it to lose wealth in the first place, then yes, painting a house most definitely creates wealth!

If you buy a piece of property for $10,000. You build a house on it for $50,000 so that together it is worth $60,000. The house burns down and you then rebuild it for $50,000 again. Is your property now worth $110,000? No, its still worth just $60,000. There is no value added.

But the ACT of rebuilding the house did add value! It was another act (the fire) which destroyed the wealth. Your'e acting like wealth can never be created if it's destroyed beforehand, and that's just ludicrous!

If my car gets totalled by a drunk driver, the drunk driver has destroyed wealth. You've already agreed that making a car is creating wealth—but by your argument it wouldn't be in this case solely because I would be buying it to replace a car I had lost!

Do you really not see the insanity in your view?

Your logic also invalidates your cookie example, since the cookies are destroyed when they are consumed. So making cookies by this logic doesn't create wealth either, even though you previously admitted that they did!

[Malachi151]

Originally posted by Grammatron



On the contrary, it has everything to do with it. The houses in Beverly Hills and similar places grew in value over time while still being the same structurally and location wise. So, the person who owned a house like that had his wealth grow with out adding anything onto the house. Which goes against your definition of wealth.

That has nothing to do with the argument either.

[Grammatron]

Originally posted by Malachi151


That has nothing to do with the argument either.

What is the argument about then?

[davefoc]

I was wondering that also.

[Malachi151]

BTW, shanek, here is a book that we can probably agree on:


Wealth and Democracy: How Great Fortunes and Government Created America's Aristocracy

http://www.walmart.com/catalog/product.gsp?product_id=1630483&sourceid=24370145423984179768

What is the argument about then?

Umm... the process by which wealth is created...

I hate these kinds of threads becuase it inevitably breaks down in having to explian every little thing.

When you go about trying to understand a system you create models. Models are simplifications of a system, typically isolated elements of the system. What you first do is break the system down into its smallest parts and you first gain an inderstanding of how each of those elemetns interacts with each other. Once you have done that, then you move on and add to it.

We have not yet agreed on how the most basic elements work yet.

[Grammatron]

Originally posted by Malachi151
As I suspected, you have no idea. Wealth can only be reflected by material goods. Wealth is property. Wealth is created by mining, growting, collecting, creating. You cannot create wealth in a stock market, you don't create wealth by mowing a lawn.

Making money is not creating wealth. Cutting down trees and using them to build a house is creating wealth.

Essentially wealth represents resources.

The only way to create wealth is to produce material resources.

More on wealth and capitalism:

http://www.pcdf.org/1999/wealth.htm

Your own argument proves you wrong if you take my example into account. Not to mention that -- as was mentioned by people before me -- most of what you said does not make any sense. You would only be correct if out system of commerece depended only on bartering, however it is not. If I am an engineer, I don't need to bring in my products to a Supper Market to trade it for food, I could sell my product or sell my time to work on a product for someone for money and then take that money and buy goods that I want. That is why people's worth is not counted in house, cars, breads or onions but $$$.

[gnome]

Originally posted by shanek
BTW, in case anyone's curious, here's an example of Yappian currency:

http://www.janeresture.com/fedmic/yapmoney.jpg

A rock this size would represent the wealth of an entire village, if not more. Smaller rocks are used for smaller denominations of money. They vary anywhere from six inches to twelve feet around.

Bill Gates would have a hernia! :D

... but they were so huge no one ever had collected enough ningis to equal one pu, and galactibanks refused to peddle in small change. :D

Malachai, I gotta go with Shanek and Victor on this one.

[shanek]

Originally posted by Malachi151
BTW, shanek, here is a book that we can probably agree on:

Wealth and Democracy: How Great Fortunes and Government Created America's Aristocracy

I've heard good things about it, but I haven't read it.

[Skeptic]

Shanek, explain how wealth is created.

To paraphrase Stephan Leacock, who, being both a professional economist and a humorist, was singularly suited to answer Malachi's laughable economic "theories":

"Wealth is created by opressing the poor. Example: buy land near a city. Buy the land in the direction the city will grow. Do not buy land in a direction the city will not grow. When the city grows in the direction your land is in, your land value increases because more people want to buy it. You can now sell it, and make a profit on the back of the poor."

To add to this, one should not that once you sell the land and therefore opress the poor, it is eminently fair that you should pay 98% taxes on your profit as punishment and retribution for your henious crime of buying something cheaper than what you sold it for.

[davefoc]

Malachi said:
I hate these kinds of threads becuase it inevitably breaks down in having to explian every little thing.


Malachi, with due respect, I think you are responsible for the way this thread went.

It would have been very easy for you to start the thread by defining what you meant by wealth creation. And then used this definition to talk about what ever point it is that you were trying to make. You might have received some comment from people arguing for a broader definition, but then you could have just said that for the purposes of this thread this is what you meant by wealth creation.

Instead you acted like your particular interpretation of the phrase wealth creation was right and other people's were wrong. Numerous people have shown you how your definition of wealth creation was not necessarily better than anybody elses and in fact is somewhat inconsistent. Instead of acknowledging the points that these people were making, and moving on to discuss your main point (assuming you had one) you chose to relentlessly defend a position that was inherently inconsistent. That is why this thread went the way it did.

[Victor Danilchenko]

shanek

How can you POSSIBLY be this dense???he isn't -- he is just stuck in the mental rut of vulgar marxism.

Kinda reminds of of a scene from "Yankee at King Arther's Court". it went something like this:

"I each 5 silvers a week!
-- Well, I I earn 10 -- I earn more.
-- So? I can buy a cow for one silver, you have to pay 4 silvers. I pay less for food, too -- I can buy more with my 5 silvers than you can with 10.
-- but I make more money! What are you talking about?!."

[Malachi151]

Sorry, but you people are all missing the points, and not understanding the issues.

BTW, on a somewhat related side note, this is from the "Libertarian Glossary":

http://se1.com/usp/lr/glossary.htm

Money - A representation of the duration and quality of a person's endeavor. As a unit of account, medium of exchange and store of wealth, money usually takes the form of a valued commodity. The commodity is sufficiently rare that small amounts of it can be exchanged for large amounts of other commodities. Ideally it resists deterioration and is divisible into smaller amounts that can be recombined into larger amounts without loss. The Nobel metals like gold and platinum fulfill all of these criteria. Silver is often used when gold is not available in sufficient quantity for the economic activity. When substituted for gold or used in conjunction with gold, silver has been used to reduce loan costs, i.e. inflate. Paper script could be acceptable as money if it were fully redeemable in the commodity it represents and the commodity existed on account in sufficient quantity to cover all of the script. Unfortunately, the ease with which script can be created has repeatedly proven too great a temptation for governments to resist. For this reason, script fails to be a store of wealth. Script unassociated with a commodity, e.g. Federal Reserve Notes have no intrinsic value. People must be compelled to use it (Legal Tender laws) and it must be forcibly extracted (taxed) from the economy fast enough to artificially maintain its value at tolerable levels of inflation.

Wealth - Accumulation of property.

Property - Anything non-sentient than can be owned and traded, includes land, minerals, products, animals, light, sound, waste and self.


Which is part of what I am getting at. "Money" is not wealth. Money can be representative of wealth, but our money is not, because we have more money than we have physical wealth for which it represents. This was the result of moving away from the gold standard.

Now, back to the dicussion at hand. I don't see what is so hard to understand here. Wealth is not created simply by money changing hands. There has to be a tangable result, and the wealth is represented in that tangable result. If you build a house. It burns down the next day, and you re-build it again, you have not created twice the wealth, you lost wealth, and then recreated it. There is no net gain. That same applies to mowing a yard if it can even be said to apply at all. The case for yard mowing is weak, but let's just assume that it is a case of creating wealth. When teh grass grows the work is undone, the yard has now lost value again. You go and mow it again, and you are simply returning it to a state of its previous value. The value of the yard does not go up each time you mow it, due to mowing it.

The value of property my certianly go up due to appreciation, but that has nothing to do with work or mowing the yard, appreciation is separate from the activity of mowing the yard.

Why is this hard to understand for people?

Simply moving money around in the economy is NOT creating wealth. Its just moving wealth. In order to create wealth you have to CREATE some tangable value, and when that item is gone then the wealth is lost, so if you create a sandwich, you have creaed wealth, but when someone eats it, then its gone, that wealth no longer exists.

The Difference Between Money &Wealth
How out-of-control speculation is destroying real wealth

http://www.pcdf.org/1999/wealth.htm

[Victor Danilchenko]

Malachi151

I don't see what is so hard to understand here. Wealth is not created simply by money changing hands. There has to be a tangable result, and the wealth is represented in that tangable result.I think I understand your problem -- and it's very marxist in nature. You think of value as being a property of an object -- so in your view, the only way to increase value is to make more objects.

What you are missing is that value is not a property of an object -- it's a property of the interaction between people and objects. Say this to yourself, roll the idea over in your head, grok it!

If a loaf of bread is worth $1 to person A and $2 to person B, the said loaf of bread simply changing hands creates value ($1 worth of value, to be exact), just as surely as value would have been created if A, instead of giving the loaf to B, simply bakes another $1 loaf.

Because value is created in people's minds as surely as in the objective world, trade creates value as surely as manufacturing does.

it's an old marxist problem -- Marx always refused to recognize the importance of demand in affecting the value of production, he always thought that value is a property of objects rather than a property of people's interactions with objects.

Simply moving money around in the economy is NOT creating wealth. Its just moving wealth.This is what you don't get -- the right sort of moving of wealth (the bread changing hands from baker to consumer, let's say) is creation of wealth -- it's the creation of additional value, because value is not in the loaf, but in how people deal with the loaf.

In order to create wealth you have to CREATE some tangable value,But what is value? I weave a water-resistant breadbasket that nobody wants -- I created an object, but since nobody wants it, I have created no wealth. Then suddenly I find a guy who likes to eat sandwiches underwater, and he wants my basket -- all of a sudden, the basket is valuable, and represents wealth. When was the wealth created? Surely not when i wove the basket -- because then, had I not found the customer, my basket would have been worthless. No, wealth was created because I suddenly found a point of value differential -- that which was worth nothing to me, is worth something to another person, and so the mere fact of trading it to him created wealth.

The Difference Between Money &Wealth
How out-of-control speculation is destroying real wealthyes, speculation and sotck market games can destroy wealth, because it often -- not always -- amounts to a zero-sum game. However, that doesn't mean that wealth cannot be created in trade -- it just means that the same principles which allow trade to create wealth, also allow it to destroy wealth, by stumbling across the points of negative value differential. it's a matter of implementation rather than design.

[Malachi151]

No, what I'm talking about has nothing to do with Marxism.

I've tried searching on this subject via Google, but it seems its impossible to find any decent info on this because if you search on wealth and creation or anything like it then you get a bunch of infomercial crap trying to sell you self help books written by sharlatins.

If a loaf of bread is worth $1 to person A and $2 to person B, the said loaf of bread simply changing hands creates value ($1 worth of value, to be exact), just as surely as value would have been created if A, instead of giving the loaf to B, simply bakes another $1 loaf.

Because value is created in people's minds as surely as in the objective world, trade creates value as surely as manufacturing does.

Debatable, but it still does not address the origional points.

And again, you eat the bread, its gone, and therefor so is the wealth.

This is what you don't get -- the right sort of moving of wealth (the bread changing hands from baker to consumer, let's say) is creation of wealth -- it's the creation of additional value, because value is not in the loaf, but in how people deal with the loaf.

Again: "Simply moving money around in the economy is NOT creating wealth. Its just moving wealth."

What you just said does not refute that statement.

But what is value? I weave a water-resistant breadbasket that nobody wants -- I created an object, but since nobody wants it, I have created no wealth. Then suddenly I find a guy who likes to eat sandwiches underwater, and he wants my basket -- all of a sudden, the basket is valuable, and represents wealth. When was the wealth created? Surely not when i wove the basket -- because then, had I not found the customer, my basket would have been worthless. No, wealth was created because I suddenly found a point of value differential -- that which was worth nothing to me, is worth something to another person, and so the mere fact of trading it to him created wealth.

No, the wealth was created when you created the basket. That is when it became tangable property. You are essentially talking about appreciation, which is a separate issue. Its one to be considered and discussed, but we have to handle the basics first before moving on.

It does get to the issue of wealth being in the eye of the beholder though, just like when the Spanish came to the Americas and they sought gold. The natives didn't care about gold, to some it was worth no more than other rocks. So yes, the value is something societaly ascribed. If you pay $100 for something but it is not worth $100 to anyone else then its not "tradable" or sellable, for $100, and hence its not said to be worth $100. So if the basket is only worth anything to him and no one else then as far as society is concerned it does not represent value, it represents junk with no value.

Trading stock is never creating wealth, its always a zero sum game. The companies can use the money that they raise from the sale of stock to create wealth, but buying and selling stock is just moving money from one person to another, zero sum.

[Victor Danilchenko]

Malachi151

And again, you eat the bread, its gone, and therefor so is the wealth.Yes, wealth is consumed at a steady pace. Everything eventually breaks or is used up -- some things faster than others. So what? if it makes you feel better, let's say we were talking not about bread loaves but about iceskates.

Again: "Simply moving money around in the economy is NOT creating wealth. Its just moving wealth."that's right; if I steal $100 from you, no wealth is created. But in reality, money is rarely simply moved around -- monetary transactions reflect trade, and trade creates wealth.

No, the wealth was created when you created the basket. That is when it became tangable property.Until i found someone who wants it, it was worthless. Until that point, 0 wealth was created.

I can make a mountain of waterproof breadbaskets, and the said mountain will represent 0 wealth. Why do you think nations acquire wealth by not undertaking worthless endeavors like mass-production of waterpoof bread baskets, but rather by doing something or making something that other peoples want?

You are essentially talking about appreciation, which is a separate issue. Its one to be considered and discussed, but we have to handle the basics first before moving on.Well, this is a special case of appreciation -- but without this sort of appreciation, there is no wealth. Nothing I make is worth anything unless someone actually wants it, and unless that someone places a value on my product that's higher than it cost me to produce it!!!

And so mere making of stuff is worthless. I can spend my entire life making waterproof breadbaskets, and i will have created 0 wealth, unless i can find a consumer for them (and not in their kindling capacity).

It does get to the issue of wealth being in the eye of the beholder though, just like when the Spanish came to the Americas and they sought gold. The natives didn't care about gold, to some it was worth no more than other rocks. So yes, the value is something societaly ascribed.Exactly! And this is why wealth is created by trade!

take two nations, A and B. A grows more crops than they can consume, but they have no iron deposits. B makes cool stuff from iron, but grows no food.

First, consider them apart. They make X bread and Y iron tools, but both nations are poor; let's call their compines wealth W=f(X, Y).

Now let them start trading -- suddently A has lots of food and lots of tools, and so does B. All of a sudden, both A and B are wealthy; let's call their combined wealth W'=f(X,Y).

What happened? The production didn't increase, so if the wealth function f only depended on production, W should be the same as W'; yet W' is much higher that W. The wealth increase -- delta-W -- is not due to production, but simply due to trade, due to objects 'merely' changing hands. There is nothing 'merely' about it, though. What this means is that the wealth function f is not a function of production/consumption alone, it's also a function of trade

If you pay $100 for something but it is not worth $100 to anyone else then its not "tradable" or sellable, for $100, and hence its not said to be worth $100. So if the basket is only worth anything to him and no one else then as far as society is concerned it does not represent value, it represents junk with no value.Right. So whether I created wealth or not depends not just on what I made, but also on how much others value it; from which we can deduce that moving it from a person who values it low, to a person who values it high, creates wealth. Wealth is created not when I simply make an object, but when I find someone who values that object!

Trading stock is never creating wealth, its always a zero sum game.It's zero-sum in objects, but it's not zero-sum in value. The whole point of trade is that it can create value without making stuff -- it creates value by re-distributing stuff more efficiently. Just as in my tools/crops example above.

The companies can use the money that they raise from the sale of stock to create wealth, but buying and selling stock is just moving money from one person to another, zero sum.if the money is poured from a company that wastes it to a company that does somethign valuable, stock trading creates wealth. just like trade. Anmd it's subject to the same restrictions -- if A, the crop-growing nation, started selling iron tools to B, they would actually be destroying wealth. By the same token, certain stock trades can destroy wealth, and in fact certain stock-trading strategy bet on wealth destruction. However, whether wealth is created or destroyed, is a function of how the trades are made -- stock-market is not a zero-sum game.

[Ed]

Economics is post hoc gibberish.

[shanek]

Originally posted by Malachi151
Which is part of what I am getting at. "Money" is not wealth.

Who said it was?

Money can be representative of wealth, but our money is not, because we have more money than we have physical wealth for which it represents.

Actually, that's impossible. The money always reflects the value of all of the goods and services in an economy. If you print too much money, then each individual note with be worth less, because the total amount of money (which is now larger) must still reflect the total number of goods and services in the economy. This is exactly what inflation is.

This was the result of moving away from the gold standard.

Going away from the gold standard just allowed the government to print money with impunity (essentially counterfieting it) and run massive deficits.

Wealth is not created simply by money changing hands.

I don't recall anyone saying it was.

There has to be a tangable result, and the wealth is represented in that tangable result.

Right, like...a MOWN LAWN!!!!

If you build a house. It burns down the next day, and you re-build it again, you have not created twice the wealth,

Yes, YOU have, since YOU were not the one who burnt the house down. If you set the house on fire and then rebuilt it, you would be correct, assuming the value of the new house does not exceed the value of the old. May times people and companies will tear down existing structures and build nicer ones; this would count as a creation of wealth. But I'm taking your example to mean that you're rebuilding the house exactly as it was before.

you lost wealth, and then recreated it.

Overall, no. But you end up with more wealth than you would have had had you not rebuilt the house.

The value of property my certianly go up due to appreciation, but that has nothing to do with work or mowing the yard,

Any landscaper will tell you that's ridiculous. Why do you think so many companies spend so much money to maintain their grounds, work the grass, plant trees, etc.? Because it INCREASES THE VALUE OF THE PROPERTY!

Why is this hard to understand for people?

Maybe because it isn't true?

[shanek]

Originally posted by Malachi151
No, what I'm talking about has nothing to do with Marxism.

But your Marxist ideals are corrupting your thought processes here. You're making the same mistakes that Marx did.

And again, you eat the bread, its gone, and therefor so is the wealth.

Just like the cookies, and yet, you originally said that cookies were a creation of wealth!

Which is it? Are consumables wealth or not?

What you just said does not refute that statement.

Considering that nobody made the statement to begin with, I don't see why he'd have to.

No, the wealth was created when you created the basket. That is when it became tangable property.

So, making something that is completely useless and nobody wants is wealth creation?

If I make a "bottomless basket," just by not having a bottom to it so that everything you put in it drops through, it could easily be the case that the fruits of my labor are not worth as much as the original materials I used to weave the basket with, because they could have been made into a real basket which is quite useable. Hence, I have not created wealth even though I made something which resulted in tangible property.

Don't you think the straw the basket was woven out of was tangible property to begin with?

So if the basket is only worth anything to him and no one else then as far as society is concerned it does not represent value, it represents junk with no value.

But it isn't society who buys baskets. Engineering calculators aren't worth much to anybody but engineers. That doesn't mean it's "junk with no value." As long as SOMEBODY says it has value, it does. How much value it has is a function of the interaction of supply and demand.

Trading stock is never creating wealth, its always a zero sum game.

No, it's not. That's something you have refused to get no matter how many times I explain it to you.

In and of themselves, transfer payments (which include the sale of stocks) do not create wealth. But that doesn't mean the stock market is a zero-sum game. If I have $100 worth of stock, and the price of the stock goes up to $200, it DOES NOT mean that somebody somewhere has lost $100! If the company created enough wealth in the market place to increase the value of their company, then no one has lost out by this appreciation of value!

You Marxists insist that wealth is some limited pool, and any time someone takes from it it's always at the expense of someone else. But wealth is essentially unlimited; the only question is how much of it we can realize through production of things that people want and need.

People WANT cookies and breadbaskets and bread and mown lawns and music and movies etc. These things have value to them. Providing any of them creates wealth, assuming that the value the consumers regard the goods to have is greater than the value of the resources used to create it. That's it. PERIOD.

[Skeptic]

Going away from the gold standard just allowed the government to print money with impunity (essentially counterfieting it) and run massive deficits.

Er...

Gold, like paper money, is a medium of exchange. Gold (and sometimes silver, etc.) was used as such because it was hard to counterfeit (being rare) and durable (being resistant to oxidation). This meant that the value each coin of gold represented in the economy could be trusted to be stable--you could safely sell a product of real practical use (say, a cow or a house) for gold coins, knowing that it is very likely that the same gold coins will retain their value the next day.

Gold has very little intrinsic value, except perhaps as a conductor in certain electronic components or for ornamental use; it is good as a medium of exchange merely due to its rarity and durability. If the alchemists had succeeded in creating gold out of lead, gold's value would instantly drop to that of lead; and, needless to say, a different medium of exchange would have to be found.

This was convenient--and essential in ancient times--but there is nothing essential in tying a country's currency to gold in particular. As long as the supply of the medium of exchange is limited, anything--from electronic "credits" to to rare seashells--can serve as that medium. Whether the limiting factor on the medium's supply is due to nature (in the case of gold and seashells) or due to human engineering (in the case of paper money or credit cards' electronic transfers) is secondary.

A "cashless society" will only have as its medium of exchange certain electronic "credits" transferred between computers. It will, however, be just as much "real money" as paper money is, and paper money is just as much "real money" as gold is. Neither of the three have any practical value in themselves--all three, however, due to their durability and limited supply, are good as mediums of exchange--which is what "money" is.

So to say that paper money not backed by gold, specifically, is "counterfeit" is like saying that paper money not backed by seashells, specifically, or by copper rods, specifically, or by salt, specifically (all three were used by different societies as mediums of exchange) is "counterfeit". It isn't; it's merely the replacement of one medium of exhange (gold) with another (paper). There is nothing economically holy or of "real value" about gold.

[Victor Danilchenko]

Skeptic,

Shane's point is that the exchange medium is now not constrained by anything but government's adherence to its policies. Government cannot make gold, but they can print paper money, so shane sees that as the root of many evils.

He is of course wrong, but for reasons different from what you said. The fact that government can print money is a good thing, as long as the governmental money-printing follows a well-defined and agreeable monetary policy -- by printing or taking out of circulation money, government can control inflation, deflation, international exchange rate, etc.

[Malachi151]

that's right; if I steal $100 from you, no wealth is created. But in reality, money is rarely simply moved around -- monetary transactions reflect trade, and trade creates wealth.

And this is the point. Trade does not create wealth, manufacturing creates wealth.

Right. So whether I created wealth or not depends not just on what I made, but also on how much others value it; from which we can deduce that moving it from a person who values it low, to a person who values it high, creates wealth. Wealth is created not when I simply make an object, but when I find someone who values that object!

We may be getting into symantics at this point, but since wealth is defined as propety I would say no, that's not corect. The wealth is create when it is made, the VALUE of the wealth is ascribed by society. And here we do get back to my old claims that "all wealth is created by society", which should say that "all value is created by society".

Wealth, property, is created by individuals, and the value of that property is defined by society.

However, none of this deals with the origional arguments and issues. If you have 10 cooking pots and I have a goat, and you trade me the 10 cooking pots for the goat, has anything happened? No, it has not. All of the property is the same, just in different hands, and we have defined the goat as being worth 10 cooking pots.

There is no creation of wealth there.

The creaton of wealth was when the pots were made and the goat was born.

In the case of money its just a means of exchange, but it still represents the property, at least it is supposed to, but we now have a sytem with money that does not represent property so our monitary system is a bit jacked up, hence the need for a Federal Reserve.

Now, anyway in the case of money we can say that 10 pots are worth $5 and the goat is worth $5. I raise a goat and sell it for $5, I then use that $5 to buy 10 pots. The creation of wealth does not take place with the transaction on money.

If I then pay a woman $5 to give me a back massage then there is no creation of wealth there, there is no property. I'm paying money for a service, I'm just transfering my wealth to her.

She is not creating wealth, I am not creating wealth.

I make 10 pots. I sell them for $5. I created wealth and exchanged it for money. I then take that money to a massage parlor and pay it to someone to massage me. All that happened there was wealth got transfered. I then have to go and create new wealth by making 10 more pots if I want to have more money to do something with.

See what I am saying. Economies rely on production. The wealth is created with production and then from productin it is moved around the system.

[Victor Danilchenko]

Malachi151

And this is the point. Trade does not create wealth, manufacturing creates wealth.then let's get wealthy by manufacturing clay croissants!

The wealth is create when it is made, the VALUE of the wealth is ascribed by society.And how much wealth is creates if the value of my clay croissant is 0? In a way, value -- a social construct -- is wealth.

And here we do get back to my old claims that "all wealth is created by society", which should say that "all value is created by society".And when a baker gives his loaf to the consumer, he creates wealth by the mere act of trade. He created $1 of wealth himself by baking the loaf ('cuz it's worth $1 to the baker), and then another $1 by simply trading the loaf to the consumer ('cuz it's woth $2 to the consumer).

Wealth, property, is created by individuals, and the value of that property is defined by society.Except that the value of property is what represents wealth, not the fact of the property's existence. bread loaf represents wealth not just because it exists, but because someone acually wants it. No wealth is created by manufacture of things that nobody wants!

However, none of this deals with the origional arguments and issues. If you have 10 cooking pots and I have a goat, and you trade me the 10 cooking pots for the goat, has anything happened? No, it has not. All of the property is the same, just in different hands, and we have defined the goat as being worth 10 cooking pots.

There is no creation of wealth there.That's right. But if you have 2 goats and I trade you 5 pots for one goat, we have created wealth -- because now I have both food and cookware, and so do you, whereas before neither one of us had the means to make a meal.

The creaton of wealth was when the pots were made and the goat was born.:rolleyes: Do you even listen to what is beign said?

Now, anyway in the case of money we can say that 10 pots are worth $5 and the goat is worth $5. I raise a goat and sell it for $5, I then use that $5 to buy 10 pots. The creation of wealth does not take place with the transaction on money.that's because you made an artifically stupid example. if I trade you 5 pots for one of your two goats, each one of us is better off, the value of my possessions (a goat and 5 pots) is higher to you than it used to be (10 pots), and the value of your possessions (a goat and 5 pots) is higher to you than it used to be (2 goats). We created wealth simply by trading appropriately.

If I then pay a woman $5 to give me a back massage then there is no creation of wealth there, there is no property. I'm paying money for a service, I'm just transfering my wealth to her.but your value is increased -- you feel better, happier. That is also wealth -- intangible, but it's still wealth. Two nations with the same material status but different cultural status are not equally wealthy.

See what I am saying.yes, i do. You create an artificially stupid example. I gain nothing by trading my only goat for 10 pots -- but I do gain something by trading one of my 2 goats for 5 pots.

Economies rely on production. The wealth is created with production and then from productin it is moved around the system.Wealth is created both by production and by trade. Get it through your thick marxist skull, dude.

P.S. How come you didn't say one word about by example of crop/tool trading nations -- a clear example how trade elevates two poor nations into wealth? Why do you keep contriving moronic examples?

[Malachi151]

This is getting to be too much BS, you are stretching so far its absurd. "but your value is increased -- you feel better, happier. That is also wealth -- intangible, but it's still wealth."

Dude, find one credible economist that would back this up :p

How many times do I have to present the definition of wealth, it is property.

This is why these discussions are stupid, because without real authorities you can just keep on saying silly things.

Anyway, I just e-mail three economists and sent them this thread, maybe one will pipe in :p hehe

My main point is that accumulation of wealth and creation of wealth are two different things. You can collect wealth without creating wealth. Not all people who are wealthy have ever created any wealth.

Gaining wealth through the stock market is not creating wealth, that is just collecting wealth from other people. All money in the stock market has come in from investors. Its no different than if you walk into a room and put $1,000 on a table and then I walk up and take it. Its essentially the same as gambeling.

You go to a poker game and everyone brings $100 with them. At the end of the night 1 guy may have $300, and one guy may have zero, and 4 guys may have $50 each. The money has changed hands and moved around, but nothing has been created. The stock market is the exact same things. The only difference is that people keep bringing new money to the table instead of just having a set amount.

then let's get wealthy by manufacturing clay croissants!

There is some truth to this, but not exactly. What is deemed wealth is defined by society, and perhaps even the individual, so trade can move commodities around into markets where they are more highly valued, and trade tends not to do the opposite because that would result in a loss of value.

Howevre trade is not really doing this, because somethign can stay put and not be traded adn still have a rise in value. What is doing this is a chang in how a commodity os viewed by society. You can either move the commodity into a different society, or society itself may change its views, hence appreciation of assets.

Appreciation is really the same if it is done by relocation from one market to another or if it stays in place and the local market changes. Hence obviously land values increasing. The land in not traded, it can just sit in place for 100 years and never exchange hands or be bought or sold, yet its value can increase.

Is that creation of wealth? I dunno. If it is its obviously not the product of action taken by the individual, but a product of society's evaluation of the property. So again, society creates that value, not the land owner. Some definitions of wealth that I have seen define wealth as an object produced by labor, that labor is required to realize value. I dunno, thats a whole other discussion.

And how much wealth is creates if the value of my clay croissant is 0? In a way, value -- a social construct -- is wealth.

Here is a somewhat classical piece on this matter (long):

http://www.econlib.org/library/Senior/snP2.html

And how much wealth is creates if the value of my clay croissant is 0? In a way, value -- a social construct -- is wealth.

I don't exactly agree with that logic, but yes, the baker created $2 of wealth by producing the bread.

Except that the value of property is what represents wealth, not the fact of the property's existence. bread loaf represents wealth not just because it exists, but because someone acually wants it. No wealth is created by manufacture of things that nobody wants!

True, see: http://www.econlib.org/library/Senior/snP2.html

That's right. But if you have 2 goats and I trade you 5 pots for one goat, we have created wealth -- because now I have both food and cookware, and so do you, whereas before neither one of us had the means to make a meal.

Not really. When yo make the meal, yes then you have created new wealth. But, let's just say the items are not ones that "work together" to avoid this situation anyway. Cooking pots and broom sticks for example. If you make 10 cooking pots and I make 2 broom sticks and you trade me 5 pots for 1 stick, its still the same thing. Exchange is not where wealth is created, production is.

Exchange is where wealth is realized.

that's because you made an artifically stupid example. if I trade you 5 pots for one of your two goats, each one of us is better off, the value of my possessions (a goat and 5 pots) is higher to you than it used to be (10 pots), and the value of your possessions (a goat and 5 pots) is higher to you than it used to be (2 goats). We created wealth simply by trading appropriately.

Yes, in this example that can be said to be true if you consider the items to be bundeled. However, its not the actions of trade that did it. If I had gone out on my own and raised a goat and also made 5 pots the value would be the same. Its the same old story of a guy out in a remote location selling a can of beans to a lost hungery travler for $0.50, then after he sells him the can, he tells him the can opener costs $20.00.

but your value is increased -- you feel better, happier. That is also wealth -- intangible, but it's still wealth. Two nations with the same material status but different cultural status are not equally wealthy.

No, wrong, you have no tangable asset. Happiness is not wealth.

yes, i do. You create an artificially stupid example. I gain nothing by trading my only goat for 10 pots -- but I do gain something by trading one of my 2 goats for 5 pots.

No, it wasn't a stupid example. Yes you gain something, but the trade itself is not creation of wealth, its an exchange of wealth. Creation is when something is produced.

P.S. How come you didn't say one word about by example of crop/tool trading nations -- a clear example how trade elevates two poor nations into wealth? Why do you keep contriving moronic examples?

Yes, trade can obviously facilitate the production of wealth. If two separate economies trade goods that each of the other lacks in order to produce some other good or service then obviously the trade gives each economy the materials they need to produce even more wealth.

You still never addresed the origional issues. For example, is a guy mowing the yard every week creating wealth? He is just mainting the value of the yard, he is not making it increasingly more valuable each time he mows it, so he is performing a service, which has value, but it does not create wealth. Just like a prostitute giving a blowjob is a service that has value, but its not creating wealth.

[Grammatron]

Yes, trade can obviously facilitate the production of wealth. If two separate economies trade goods that each of the other lacks in order to produce some other good or service then obviously the trade gives each economy the materials they need to produce even more wealth.

You still never addresed the origional issues. For example, is a guy mowing the yard every week creating wealth? He is just mainting the value of the yard, he is not making it increasingly more valuable each time he mows it, so he is performing a service, which has value, but it does not create wealth. Just like a protiture giving a blowjob is a service that has value, but its not creating wealth.

Malachi, you are either very clever or very ignorant to your own writing. The first paragraph clearly proves the "lawn mowing" example! You have a person (A) who needs their lawn mowed and you have another person (B) who has ability and skill to mow lawns. A then trades money for B's time and skill of mowing the lawn, which allows A to make more efficient use of their time to make more money. You can't tell me you don't see the obvious correlation.

I would address your analogy to the prostitute, but it might be against the forum rule. Perhaps you could rephrase it?

[Victor Danilchenko]

Malachi151

This is getting to be too much BS, you are stretching so far its absurd. "but your value is increased -- you feel better, happier. That is also wealth -- intangible, but it's still wealth."

Dude, find one credible economist that would back this up :p pretty much all credible economists include th evalue of intangibles, such as leisure of emotional well-being -- economics cannot be worked otherwise, since it could never explain such simple things as people working part-time. if you want specific names, try the famous liberal economist Nicholas Barr.

You have no clue about economics, do you?

How many times do I have to present the definition of wealth, it is property.it doesn't matter how much you do it, you are still talking caca.

This is why these discussions are stupid, because without real authorities you can just keep on saying silly things.You were proven why your point is idiocy.

You go to a poker game and everyone brings $100 with them. At the end of the night 1 guy may have $300, and one guy may have zero, and 4 guys may have $50 each. The money has changed hands and moved around, but nothing has been created.Good thing stock market is not a zero-sum game then.

The stock market is the exact same things.No, stock market effects redistribution of investment -- presumably from companies who use funds inefficiently, to th eones which use it better. The net result is creation of wealth. Stock market can be like a poker game, zero-sum, but this is not a necessary property of its nature.

I don't exactly agree with that logic, but yes, the baker created $2 of wealth by producing the bread.No, the baker created $1 by making bread, and another $1 by trading bread.

The alternative -- your view -- is that only $1 value is actual, and $1 is potential, to be realized in trade. however, you cannot in principle know the potential value until you trade; and so this potential value becomes a simple retroactive weaseling, trying to explain stuff post-hoc.

let's just say the items are not ones that "work together" to avoid this situation anyway. Cooking pots and broom sticks for example. If you make 10 cooking pots and I make 2 broom sticks and you trade me 5 pots for 1 stick, its still the same thing.No, it's not -- because specialization increases efficiency. if i make cookpots and you make broomstick, I would be better an making cookpots, and you would be better at making broomsticks. if I make 4 cookpots and 2 broomsticks myself, and you make 4 cookpots and 2 broomsticks youself, we are worse off than if I made 10 cookpots and you made 6 broomsticks, and we traded. The wealth is created at the line of cost/value differential -- it costs me the same to make 10 cookpots or 4 broomsticks, and it costs you the same to make 8 cookpots and 6 broomsticks, and so we specialize, and then create additional wealth by trading.

Exchange is not where wealth is created, production is.Both is where wealth is created. having more food that you can eat won't avail you much if you lack tools; having a shedfull of tools won't avail me much if I have no food. We create wealth by trading.

No, wrong, you have no tangable asset. Happiness is not wealth.Happiness has economic value. leisure has economic value. A good-feeling massaged back has economic value. A mowed lawn has economic value. Anything that people can buy and sell has eocnomic value; without counting the intangible assets, you cannot make the equations come out right.

No, it wasn't a stupid example. Yes you gain something, but the trade itself is not creation of wealth, its an exchange of wealth. Creation is when something is produced.yes. value is produced -- it's just that value is produced not through object creation, but through increasingly efficient object allocation. However, it's still wealth.

Yes, trade can obviously facilitate the production of wealth. If two separate economies trade goods that each of the other lacks in order to produce some other good or service then obviously the trade gives each economy the materials they need to produce even more wealth.No, dummy, they make wealth by trading. If I trade my excess food for your excess tools, we are both wealthier.

You still never addresed the origional issues. For example, is a guy mowing the yard every week creating wealth?Nope. the increase in value (slight improvement of th elawn) is less than his cost (labor). however, if he mows a lawn once a month, he does create wealth.

He is just mainting the value of the yard, he is not making it increasingly more valuable each time he mows it,yes, he is. it so happens that yards lose value over time at a particularly steady and predictable rate -- but so do houses, cars, clothes, etc. As i said, value is constantly lost to entropy, so it takes certain rate of wealth creation simply to maintain the value. It's still wealth creation.

[davefoc]

As i said, value is constantly lost to entropy,

This notion appeals to me. I own a small ampartment building and I often think of the various maintenance tasks as a fight against the expansion of entropy and all the various entropy allies, like termites and corrosion.

[Tormac]

Those two links you posted up were an interesting read Malachi151. Thanks.

I hate to seem to be ganging up on you here, but I have a question about one of your responses in reply to shanek, in light of the link you posted.

When you said Malachi151
No, wrong, you have no tangable asset. Happiness is not wealth.

does that not contradict the post you supplied at http://www.econlib.org/library/Senior/snP2.html?

The first section on that post on the idea of Utility suggests that
Of the three qualities which render anything an article of Wealth, or, in other words, give it value, the most striking is the power, direct or indirect, of producing pleasure, including under that term gratification of every kind, or of preventing pain, including under that term every species of discomfort.

Or maybe I am misunderstanding a subtle point about wealth.

[Malachi151]

Originally posted by Grammatron


Malachi, you are either very clever or very ignorant to your own writing. The first paragraph clearly proves the "lawn mowing" example! You have a person (A) who needs their lawn mowed and you have another person (B) who has ability and skill to mow lawns. A then trades money for B's time and skill of mowing the lawn, which allows A to make more efficient use of their time to make more money. You can't tell me you don't see the obvious correlation.

I would address your analogy to the prostitute, but it might be against the forum rule. Perhaps you could rephrase it?

I don't even agree that mowing the lawn is creating wealth, but just for the sake of this argument I'll say that it is.

No, its not the same. If I mow my lawn myself I've "created" just as much "wealth" as if I pay someone to mow it. The mowed lawn in the product, it is the net result, The value of the mowed lawn is the same if I mow it myself or if I pay someone to do it.

The economic transaction is not what creates the wealth, the production of the "property", in this case alleged enchancemt of value, is.

[Grammatron]

Originally posted by Malachi151


I don't even agree that mowing the lawn is creating wealth, but just for the sake of this argument I'll say that it is.

No, its not the same. If I mow my lawn myself I've "created" just as much "wealth" as if I pay someone to mow it. The mowed lawn in the product, it is the net result, The value of the mowed lawn is the same if I mow it myself or if I pay someone to do it.

The economic transaction is not what creates the wealth, the production of the "property", in this case alleged enchancemt of value, is.

Through out your posts you have completely diluted the meaning of "property." If I was to define it as something that has value, then property can take on to mean things that don't have physical form. If we go back to the lawn mowing, the example would be that -- Keep in mind A is the owner, B is the person who mows the lawns -- A is a lawyer who's time is valuable, while A can easily mow his lawn, his time would be better spent working on his clients case. B's time, while still valuable, is not as valuable when compared to the A's. That means, that A can afford to pay B because A makes more money. If we were to take your statement: "The economic transaction is not what creates the wealth, the production of the "property"," adding with how I think you are defining property "something that has value," then you will see that the B "creates more time" for A by mowing the lawn in exchange for some money.

[Malachi151]

it doesn't matter how much you do it, you are still talking caca.

Fine, show me any definition of wealth that supports your argument. I've presented 3 defintions of wealth(the only 3 I could find), all classify if as property.

No, stock market effects redistribution of investment -- presumably from companies who use funds inefficiently, to the ones which use it better. The net result is creation of wealth. Stock market can be like a poker game, zero-sum, but this is not a necessary property of its nature.

Still not getting it. A STOCK is a piece of paper, thats it. Yes, when you purchase an IPO offering you are giving money to a company. They then use that money to do whatever, presumable to invest in ways to make more money, which includes creating wealth. However, the value of that stock is not directly tied to any property in the company. When you sell the stock and if you make a profit, then YOU have not created wealth, you have simply sold that stock to a different person. The COMPANY may have created wealth using your money, yes. But your profits are not from the creation of wealth, your profits are from the sale of stock. The companies profits are from the creation of wealth, they are two separate things.

The alternative -- your view -- is that only $1 value is actual, and $1 is potential, to be realized in trade. however, you cannot in principle know the potential value until you trade; and so this potential value becomes a simple retroactive weaseling, trying to explain stuff post-hoc.

How do you determine that $1 is actual? The bread is only worth to the baker what he can sell it for, which is $2. If the baker has 500 loaves of bread, he does not want them for himself, the only value they have to him is their resale value, which is $2.

No, it's not -- because specialization increases efficiency. if i make cookpots and you make broomstick, I would be better an making cookpots, and you would be better at making broomsticks. if I make 4 cookpots and 2 broomsticks myself, and you make 4 cookpots and 2 broomsticks youself, we are worse off than if I made 10 cookpots and you made 6 broomsticks, and we traded. The wealth is created at the line of cost/value differential -- it costs me the same to make 10 cookpots or 4 broomsticks, and it costs you the same to make 8 cookpots and 6 broomsticks, and so we specialize, and then create additional wealth by trading.

Well, exactly, sort of. Due to specialization we can each create more wealth independantly and trade those larger amounts. And in that sense yes, as I said before, trade facilitates the creation of wealth. It makes it possible to create more than would otherwise be possible for a varity of reasons, including what you just stated. Instead of having 12 items in the system we now have 16, obviously more wealth. Specialization of tasks is exactly what facilitates that, you are correct. However, the produciton of the items is the production fo the wealth. If we specialize and I still only make 8 pots and you make 4 broomsticks, then no, additonal wealth is not created.

Happiness has economic value. leisure has economic value. A good-feeling massaged back has economic value.

Its not wealth. I cannto trade my happiness for goods or services. I cannot go to an auction and sell my happiness. Therefor it is not wealth.

No, dummy, they make wealth by trading. If I trade my excess food for your excess tools, we are both wealthier.

Yes, I'll agree to that.

yes, he is. it so happens that yards lose value over time at a particularly steady and predictable rate -- but so do houses, cars, clothes, etc. As i said, value is constantly lost to entropy, so it takes certain rate of wealth creation simply to maintain the value. It's still wealth creation.

Garbage, no he isn't and you know it. Again just assume that the property has a stable value. When the grass is trimmed its worth $10 more than when its long. The grass keeps growing back so the yard loses that $10 value. Then you cut the grass and return that $10 value. Each time you mow the yard you do not add $10 of value on top of the previous $10 of value. You are simply maintaining a value.

Its just like washing a car. I pay you $10 to wash my mud covered car, and assume that its now worth $10 more. I then throw mud all over it and pay you $10 again to wash it again. The car is not now worth $20 more, its still only worth $10 more then when it was dirty. I can't just do that over and over again and make my car more valuable.

What if I pay you $1,000 to jump up and down. No wealth has been created. I just gave you $1,000. Money transacted does not equal wealth created. Tangable result of of marketable value is what creates wealth.

[Malachi151]

Originally posted by Tormac
Those two links you posted up were an interesting read Malachi151. Thanks.

I hate to seem to be ganging up on you here, but I have a question about one of your responses in reply to shanek, in light of the link you posted.

When you said Malachi151


does that not contradict the post you supplied at http://www.econlib.org/library/Senior/snP2.html?

The first section on that post on the idea of Utility suggests that


Or maybe I am misunderstanding a subtle point about wealth.

No, thats just old terminology dicussing utility. He's saying that utility is the means of something to do something benefical for a person. Food has utility because it prevents you from getting hungery and dying. A bed because it makes you more comfortable, etc.

That's why people are willing to pay for something, because it has utility, and a massage has utility as well, but it is not property. Now a massage chair is property, and can be classified as wealth.

[Grammatron]

From webster.com


Main Entry: wealth
Pronunciation: 'welth also 'weltth
Function: noun
Etymology: Middle English welthe, from wele weal
Date: 13th century
1 obsolete : WEAL, WELFARE
2 : abundance of valuable material possessions or resources
3 : abundant supply : PROFUSION
4 a : all property that has a money value or an exchangeable value b : all material objects that have economic utility; especially : the stock of useful goods having economic value in existence at any one time <national wealth>


From wordreference.com


wealth [wɛlè]
noun
1 a large amount of money and valuable material possessions

2 the state of being rich

3 a great profusion
example: a wealth of gifts

4 (Economics) all goods and services with monetary, exchangeable, or productive value
[ETYMOLOGY: C13 welthe, from weal2; related to well1]
'wealthless adjective

[Grammatron]

From webster.com


Main Entry: re·source
Pronunciation: 'rE-"sOrs, -"sors, -"zOrs, -"zors, ri-'
Function: noun
Etymology: French ressource, from Old French ressourse relief, resource, from resourdre to relieve, literally, to rise again, from Latin resurgere -- more at RESURRECTION
Date: 1611
1 a : a source of supply or support : an available means -- usually used in plural b : a natural source of wealth or revenue -- often used in plural c : computable wealth -- usually used in plural d : a source of information or expertise
2 : something to which one has recourse in difficulty : EXPEDIENT
3 : a possibility of relief or recovery
4 : a means of spending one's leisure time
5 : an ability to meet and handle a situation : RESOURCEFULNESS

[Malachi151]

Yes, and...

what applies here is:

all property that has a money value or an exchangeable value b : all material objects that have economic utility

all goods and services with monetary, exchangeable, or productive value

And of course we also have the other definitions of:

dictionary.com

(Econ.) (a) In the private sense, all property which has a money value. (b) In the public sense, all objects, esp. material objects, which have economic utility.

Some libertarian website

Wealth - Accumulation of property.

Property - Anything non-sentient than can be owned and traded, includes land, minerals, products, animals, light, sound, waste and self.

Now I'm not sure how a service is considered wealth, but at any rate when you receive a massage nothing have been created.

As JILsaid, we can't gain wealth by just servicing each other all the time. I can't give you a back massage and then you give me a hair cut, and then I mow your yard, and then you rub my feet, and then I sing a song for you, etc and get anywhere. You have to produce material tangable goods to have wealth.

Likewise you can't create wealth by just buying and selling the same stuff over and over again. New things "of value" have to be produced.

I make and sell cogs. I pay an erand boy to go get groceries for me. He is performing a service. He is not creating wealth. I am creating wealth and distributing some of it to him in exchange for a service. His job does not create wealth, it may facilitate my ability to create wealth by allowing me more time to work, but he himself is not creating the wealth I am.

[Grammatron]

Originally posted by Malachi151
Yes, and...

what applies here is:

all property that has a money value or an exchangeable value b : all material objects that have economic utility

all goods and services with monetary, exchangeable, or productive value

And of course we also have the other definitions of:

dictionary.com

(Econ.) (a) In the private sense, all property which has a money value. (b) In the public sense, all objects, esp. material objects, which have economic utility.

Some libertarian website

Wealth - Accumulation of property.

Property - Anything non-sentient than can be owned and traded, includes land, minerals, products, animals, light, sound, waste and self.

Now I'm not sure how a service is considered wealth, but at any rate when you receive a massage nothing have been created.

As JILsaid, we can't gain wealth by just servicing each other all the time. I can't give you a back massage and then you give me a hair cut, and then I mow your yard, and then you rub my feet, and then I sing a song for you, etc and get anywhere. You have to produce material tangable goods to have wealth.

Likewise you can't create wealth by just buying and selling the same stuff over and over again. New things "of value" have to be produced.

I make and sell cogs. I pay an erand boy to go get groceries for me. He is performing a service. He is not creating wealth. I am creating wealth and distributing some of it to him in exchange for a service. His job does not create wealth, it may facilitate my ability to create wealth by allowing me more time to work, but he himself is not creating the wealth I am.

It is possible you might have skipped my post on the definition of the word resource. Please read it and rethink your post.

[davefoc]

Malachi, this discussion has been largely a semantic one for quite awhile. Most of us do not agree with your narrow and somewhat inconsistent notions of what wealth creation is.

But, screw it, let's just say that we define the creation of wealth like you want it defined. Perhaps something like this:

Wealth is created when physical improvements are made to materials that will last longer than a short time where short time is about 3 months. So for instance the mowing of a lawn, the sweeping of a floor, a haircut or the construction of a mold which is destroyed each time that something is built are not examples of wealth creation as defined here because they have very short useful life. Further, this definition of the creation of wealth excludes increases in knowledge by individuals because knowledge is not a physical resource. And further still any increase in value that results from a transfer of a resource from one entity to another is also excluded.

Great let's say that the above is what the creation of wealth means for the purposes of this discussion. What is your point? Can you show, by defining the creation of wealth this way, that we would be better off as a society if we centralized the control of the means of production? Is there some point that you are trying to make here that I am missing?

[Malachi151]

Originally posted by davefoc
Malachi, this discussion has been largely a semantic one for quite awhile. Most of us do not agree with your narrow and somewhat inconsistent notions of what wealth creation is.

But, screw it, let's just say that we define the creation of wealth like you want it defined. Perhaps something like this:

Wealth is created when physical improvements are made to materials that will last longer than a short time where short time is about 3 months. So for instance the mowing of a lawn, the sweeping of a floor, a haircut or the construction of a mold which is destroyed each time that something is built are not examples of wealth creation as defined here because they have very short useful life. Further, this definition of the creation of wealth excludes increases in knowledge by individuals because knowledge is not a physical resource. And further still any increase in value that results from a transfer of a resource from one entity to another is also excluded.

Great let's say that the above is what the creation of wealth means for the purposes of this discussion. What is your point? Can you show, by defining the creation of wealth this way, that we would be better off as a society if we centralized the control of the means of production? Is there some point that you are trying to make here that I am missing?

None of that is my point. This is not about centralizing anything, I simply posed this question to shanek, because he keeps talking about how taxes penalize the people to create wealth, or that this or that affects the creation of wealth in some way.

I wanted to know if he even knew how creation of wealth takes place.

Some of the details included in this discussion have gotten a little fuzzy I do agree, and I probably need to give a little more leeway, but my main point is this:

Every economic transaction is not a creation of wealth. Furthermore every job that is performed in an economy does not create wealth, every means of aquiring wealth is not necessarily a means of creating wealth. A person can aquire a lot of wealth without creating any. A person can create a lot of wealth and aquire very little.

People talk a lot about creating wealth, but what really CREATES new wealth in the system? If I own a piece of land, and the value of that land increases, have *I* created wealth? According to what Victor was saying simply increasing demand for something can be a form of creating wealth. This may be valid, but its interesting to consider.

If I have a painting and I put it up for sale and the best offer I get for it is $50. I say no, then I become famous for some reason the next day and its now worth $1,000. Have I just created $950 in addition wealth by simply becoming famous, even though the object is the same?

This gets down to advertising. Does advertising create wealth by increasing demand for items? So, in other words, are you creating wealth by simply affecting the human psyche? You are not producing any material, you are just making people want something more. Is that really productive?

And I would consider things that are temporary to still be a creation of wealth, but you also have to account for their destruction. Sure, making something that only lasts for 3 months is creating wealth, then in 3 months that wealth is destroyed so the value is lost.

To see if that is not really creating wealth can we just make things and destroy them over and over again and still gain wealth? This is an issue in our disposable society.

People pay for things that have no lasting value, so how is that really affecting our economy? Companies make money from this, but are they creating wealth? They are collecting wealth, but they are acting more like a service industry than a production industry.

[DialecticMaterialist]

Originally posted by shanek


If you mow your own lawn, you're creating wealth by giving yourself a better-looking yard.


:roll:






Ok now seriously I think Shanek's problem is that he is coming at this question from the viewpoint that we all came to an island and agreed upon a currency.


What is wealth? Ultimately goods or services that satisfies our desires.


We did not come to an island and decide to get organized, for most of our evolution we lived in bands on the African plains.

In that enviroment what was wealth and how was it made?

Wealth was made through cooperative effort mainly; of hunting animals together, gathering, and building huts.

Though some individual projects were present, such as making spears, and jewelry.

Hence our system ultimately evolved from this system.

Along the way I believe things got a bit mutated and some people earned more then they really gave or earned according to out value judgements.

Wealth is then ultimately an extension ofour desires, stuff we create to appease our appetities; whatever those may be.

Now at days overall buying power or how much wealth one can hold is represented by money. Ideally, this money would be given on the basis of what one contributes or how valuable we deem a person.

In reality many mechanisms make it more a matter of priveledge and chance. I say more a matter of priveledge and chance, because obviosously some people do get more wealth by simply being valuable or making great contributions.

Now some of these chance/privedging mechanisms must be allowed, for that creates a highly productive system.

But I think this must be tempered by some planned intervention, for the sake of fairness and our own values.


So some basic things I'd like to point out is:

To truly understand wealth and economics one must understand how our economic systems evolved and why they evolved that way. Only by doing this in a scientific manner will we ever have a good grasp of what factors help create or obstruct prosperity. Economists do this somewhat today but they are more or less just guessing, better then we can of course, but guessing none the less.


Wealth is somewhat of a relational concept. Termites build large mounds, and such is wealth for termites but not for humans. Some people with weird fetishes may for example see photographs of men in baby cloths as a sort of wealth. The guy next door may see his stamp collection as a sort of wealth. But for me it can just be junk. To truly understand the dynamics of a system then, we need a fair concept of what humans desire and why, as well as some idea of how much variation is present. Once that is accomplished, one could truly examine the dynamics of a societies or individual's wealth.

[shanek]

Originally posted by Skeptic
This was convenient--and essential in ancient times--but there is nothing essential in tying a country's currency to gold in particular.

Pretty much everything you said in your post was wrong, and this line was particularly egregious. Read The Economics of a Pure Gold Standard by Mark Skousen.

[shanek]

Originally posted by Victor Danilchenko
He is of course wrong, but for reasons different from what you said. The fact that government can print money is a good thing, as long as the governmental money-printing follows a well-defined and agreeable monetary policy -- by printing or taking out of circulation money, government can control inflation, deflation, international exchange rate, etc.

Then why have they been completely unable to do so? And why was the money so nicely self-regulating before then?

[shanek]

Originally posted by Malachi151
This is getting to be too much BS, you are stretching so far its absurd. "but your value is increased -- you feel better, happier. That is also wealth -- intangible, but it's still wealth."

Dude, find one credible economist that would back this up

Harry Browne. Milton Friedman, Llewellyn Rockwell. Ludwig von Mises. Shall I go on?

How many times do I have to present the definition of wealth, it is property.

Infinite. Because it isn't. It just plainly isn't.

Anyway, I just e-mail three economists and sent them this thread, maybe one will pipe in :p hehe

Who are they?

And guy, have you noticed that you're just repeating the same thing over and over again with no regard for whast anyone else has said? Much of which is nothing but strawman versions of our arguments?

[Malachi151]

Harry Browne. Milton Friedman, Llewellyn Rockwell. Ludwig von Mises. Shall I go on?

That's a list of names.

Present their defintions for wealth.

[Grammatron]

Originally posted by Malachi151


That's a list of names.

Present their defintions for wealth.

I do believe he already did. His definition was it, it's also known as fact. Your definition is what is called an uneducated guess.

[davefoc]

Malachi, thank you for your response.

A lot of the things you said in it were things no one has disagreed with.

In particular, you said:
And I would consider things that are temporary to still be a creation of wealth, but you also have to account for their destruction. Sure, making something that only lasts for 3 months is creating wealth, then in 3 months that wealth is destroyed so the value is lost.

It is exactly, this notion that has been expressed a number of ways by a number of people that before this you seem to have been in disagreement with. Can you now see that Shanek's original example of a mowed lawn is exactly a creation of wealth? Do you see how the creation of all wealth is temporary and that the mowed lawn is just an example of wealth creation that has a shorter life than say the building of a house?

I thought Victor Damelko said it particularly well with this:As i said, value is constantly lost to entropy, so it takes certain rate of wealth creation simply to maintain the value. It's still wealth creation.

But let's get past this. You said:I simply posed this question to shanek, because he keeps talking about how taxes penalize the people to create wealth, or that this or that affects the creation of wealth in some way.

What are you suggesting here? You don't agree that when the government removes resources from the private sector that there is likely to be an overall reduction in the creation of wealth in the society? What does agreeing on an exact definition of the creation of wealth have to do with this issue?

[Malachi151]

It is exactly, this notion that has been expressed a number of ways by a number of people that before this you seem to have been in disagreement with. Can you now see that Shanek's original example of a mowed lawn is exactly a creation of wealth? Do you see how the creation of all wealth is temporary and that the mowed lawn is just an example of wealth creation that has a shorter life than say the building of a house?

I have gone through the lawn mowing example like 10 times already. I said that my position on it is that a mowed lawn could be said to be worth more than an unmowed lawn. Therefor mowing the lawn can be considered creating wealth, ONE TIME.

If you low the lawn 100 times a year you have not created wealth 100 times, the net result is the creation of (for example) $10 of wealth.

If you pay someone $10 to mow the lawn 100 times, then $1,000 of wealth has not been created, only $10 of wealth has been created by the mowing of the lawn.

This is what I said all along, to which shanek and others disagreed.

What does agreeing on an exact definition of the creation of wealth have to do with this issue?

Simple. He claimes to understand eocnomics, I claim that he has no clue. Thats it.

[Skeptic]

Skeptic,

Shane's point is that the exchange medium is now not constrained by anything but government's adherence to its policies. Government cannot make gold, but they can print paper money, so shane sees that as the root of many evils.

Yes, I know. I was objecting to his view that this is "counterfeiting".

He is of course wrong, but for reasons different from what you said. The fact that government can print money is a good thing, as long as the governmental money-printing follows a well-defined and agreeable monetary policy -- by printing or taking out of circulation money, government can control inflation, deflation, international exchange rate, etc.

Indeed so. Like anything, it can be used--or abused. Hyperinflation is its abuse. But consider the US's situation when the gold standard was abolished: the US was by then, at least potentially, the richest country in the world in resources and technology. But the US is poor in gold (the ocassional "Gold Rush" notwithstanding). The Gold standard, in effect, would force the US to remain in totally artificial "povetry", or to rely on a supply of gold from despotic African governments.

[davefoc]

Malachi, not once did Shanek say anything like you are suggesting.

Shanek may be right or wrong, but manufacturing things that he says, disagreeing with the manufactured statements and seeing that as a basis for discounting his ideas seems intellectually suspect.

A few malachi quotes on the lawn issue preceding the I've-been-over-this-10-times comment:


You cannot create wealth in a stock market, you don't create wealth by mowing a lawn.

When you mow someone's lawn and get paid that is not creation of wealth, that is a transfer of wealth in the form of money from one person to another.

Now, what we can say is that this creates new demand for cookies and is a driving factor in the creation of new cookies, but the lawn boy does not create the wealth, the baker does.

No he didn't this is so bogus. He cut grass, he performed a service. Just use giving a massage for example, or a haircut, its all the same thing.

Still, the lawn mower is not creating the wealth, and thats what this discussion is about, the technical actuality of exactly how wealth is created and the diference between creating wealth and exchanging wealth.



What Malachi now says:

...Therefor mowing the lawn can be considered creating wealth, ONE TIME.....


Exactly, just like building a house can be considered creating wealth ONE TIME. You are now in total agreement with Shanek on the lawn issue. So now by your standards Shanek does have a clue about economics and you have abandoned your Marxist fantasies?

[Malachi151]

Originally posted by davefoc
Malachi, not once did Shanek say anything like you are suggesting.

Shanek may be right or wrong, but manufacturing things that he says, disagreeing with the manufactured statements and seeing that as a basis for discounting his ideas seems intellectually suspect.

A few malachi quotes on the lawn issue preceding the I've-been-over-this-10-times comment:


What Malachi now says:


Exactly, just like building a house can be considered creating wealth ONE TIME. You are now in total agreement with Shanek on the lawn issue. So now by your standards Shanek does have a clue about economics and you have abandoned your Marxist fantasies?

Nice selective quoting. All you have to do is move down to my next post or two on the matter to see a clarification on my position on that matter, where I plainly stated that yes it could be considered creation of wealth, one time, but then you have to account for the loss when the grass grows back, and so on.

I said the same thing about houses too. Houses can also lose value as well, and they can be destroyed, when they are the wealth that they represent is also destroyed. Having an economy with an overall net increase in wealth means more wealth is created then is destroyed. If all we are doing is mowing our yard every time the grass gets high that is not happening. If you are creating more yards and mowing more yards every day then yes it is happening, but it does not happen each time you mow a yard it only happens with each new yard that becomes a mowed yard, which was never mowed before. Hence the need for "real growth" to continue to create wealth.

[davefoc]

Malachi, sorry about any misrepresentation of your views on the lawn issue. I just didn't find a place where you succintly "clarified" your view prior to the "Therefor mowing the lawn can be considered creating wealth" quote.

Malachi said:
Simple. He (Shanek) claims to understand economics, I claim that he has no clue. Thats it.

I am a little confused here Malachi. I thought the lawn issue was the key underpinning of your Shanek doesn't have a clue about economics hypothesis. Now I understand that you thought that Shanek was right about the lawn issue, what is the basis of your hypothesis?

[shanek]

Originally posted by Skeptic
Yes, I know. I was objecting to his view that this is "counterfeiting".

If it looks like a duck, walks like a duck, and quacks like a duck... Government fiat currency has exactly the same effect on an economy as mass counterfieting. Just ask the Argentines.

But consider the US's situation when the gold standard was abolished: the US was by then, at least potentially, the richest country in the world in resources and technology.

And afterwards, our growth rate slowed to a crawl by comparison when it should have kept on expanding. That's the effect that perpetual inflation has on an economy.

The Gold standard, in effect, would force the US to remain in totally artificial "povetry", or to rely on a supply of gold from despotic African governments.

NOT true. Read the Skousen book I cited above.

[shanek]

Originally posted by Malachi151
Nice selective quoting. All you have to do is move down to my next post or two on the matter to see a clarification on my position on that matter, where I plainly stated that yes it could be considered creation of wealth, one time, but then you have to account for the loss when the grass grows back, and so on.

I said the same thing about houses too. Houses can also lose value as well, and they can be destroyed, when they are the wealth that they represent is also destroyed.

Then what was the whole point of using the cookie scenario as an example of wealth creation as differentiated from the lawn mowing example?

Personally, I think you just backpedalled so much you left skid marks...

Having an economy with an overall net increase in wealth means more wealth is created then is destroyed. If all we are doing is mowing our yard every time the grass gets high that is not happening. If you are creating more yards and mowing more yards every day then yes it is happening, but it does not happen each time you mow a yard it only happens with each new yard that becomes a mowed yard, which was never mowed before. Hence the need for "real growth" to continue to create wealth.

Oh? So motorized lawnmowers didn't help this over the old manual mowers? Riding mowers didn't help over push mowers? Technology that made it easier and faster to mow lawns didn't help in this? Hybrid grass strains and special seed mixes to make better turf with less work didn't improve things?

We can cut grass in less than an hour that would have taken several hours and much more exertion just 50 years ago. Hence, we do not have to do as much work to maintain the grass as we did then, so not only are we maintaining the wealth of our lawns, we have more time to spend producing other things.

THAT'S growth!

[Victor Danilchenko]

Malachi151

Still not getting it. A STOCK is a piece of paper, thats it. Yes, when you purchase an IPO offering you are giving money to a company. They then use that money to do whatever, presumable to invest in ways to make more money, which includes creating wealth. However, the value of that stock is not directly tied to any property in the company.No, not directly -- but it is thusly tied; it's tied to the value of the company as a whole.

When you sell the stock and if you make a profit, then YOU have not created wealth, you have simply sold that stock to a different person.But this sort of stock trading is what allows increased market capitalizations to the companies whose stocks are more valuable -- which is presumably so due to the fact that the said company produces more wealth than others. Thus, when you trade stock in general case, you both make a profit for yourself, and allow a more efficient allocation of resources by the companies.

The COMPANY may have created wealth using your money, yes. But your profits are not from the creation of wealth, your profits are from the sale of stock. The companies profits are from the creation of wealth, they are two separate things.So? Stock market is what enables the greater creation of wealth -- it's ridiculous to claim that stock trading doesn't create wealth.

How do you determine that $1 is actual?I didn't. My $1 figure was base don the assumption that that's what the loaf is worth to the baker. There is no objective value.

The bread is only worth to the baker what he can sell it for, which is $2.or what worth of other uses -- such as eating -- he can put it to.

If the baker has 500 loaves of bread, he does not want them for himself, the only value they have to him is their resale value, which is $2.Yes, eventual marginal value of bread to the baker is zero. This has absolutely nothing to do with my point -- my point is that the extra value is created by trading; which point you agree to, further down.

Well, exactly, sort of. Due to specialization we can each create more wealth independantly and trade those larger amounts. And trade enables specialization; which is yet another way in which trade creates wealth -- without trade, there could be no specialization, and thus less wealth.

And in that sense yes, as I said before, trade facilitates the creation of wealth.Trade does more than that -- it creates wealth.

There is no meaningful way to separate 'faciliation of creation of wealth' from 'creation of wealth'. If we make our own pots and broomsticks, I make 4 pots and 2 broomsticks. Trade allows me to effectively 'make' 5 pots and 3 broomsticks -- in effect, it was as if trade 'made' the extra pot and the extra broomstick. Your 'enabling/making' dichotomy is meaningless squabbling. To enable creation of extra wealth is to create wealth.

It makes it possible to create more than would otherwise be possible for a varity of reasons, including what you just stated.but it also allows the creation of additional value without the creation of additional products -- in effect, the additional value comes from trading alone.

Its not wealth. I cannto trade my happiness for goods or services.Yes you can. You can take your happy leisure time and ear more money, for example.

But that doesn't even matter -- it doesn't matter whether you could trade it to another, what matters is that happiness has value to you. In fact, happiness is the ultimate currency, the only thing which ultimately defines value.

Yes, I'll agree to that.then you are agreeing that trade creates wealth.

Garbage, no he isn't and you know it. Again just assume that the property has a stable value. When the grass is trimmed its worth $10 more than when its long. The grass keeps growing back so the yard loses that $10 value. Then you cut the grass and return that $10 value. Each time you mow the yard you do not add $10 of value on top of the previous $10 of value. You are simply maintaining a value.

Its just like washing a car. I pay you $10 to wash my mud covered car, and assume that its now worth $10 more. I then throw mud all over it and pay you $10 again to wash it again. The car is not now worth $20 more, its still only worth $10 more then when it was dirty. I can't just do that over and over again and make my car more valuable.You are just saying that wealth can be destroyed. By the same token, I can destroy a loaf of bread, make another one, destroy it, make another one, etc. -- but even though my net worth doesn't increase, the making of a loaf of bread is a production of wealth; it just so happens that I estroy each unit of wealth I produce, just as with your car. The same is true for mowing the lawn, except that lawn-mowing can't create wealth at a rate higher than a certain fixed maximum (the rate oif deterioration of a perfectly manicured lawn, to be exact).

What if I pay you $1,000 to jump up and down.if that made you happier -- if your increase in happiness is more than $1000 -- then it create wealth.

[Malachi151]

Well, it seems that Adam Smith, the "father of modern capitalism", agrees with my position on this issue:

http://www.econlib.org/library/Smith/smWN8.html#B.II, Ch.3, Of the Accumulation of Capital, or of Productive and Unproductive Labour

There is one sort of labour which adds to the value of the subject upon which it is bestowed: there is another which has no such effect. The former, as it produces a value, may be called productive; the latter, unproductive*44 labour. Thus the labour of a manufacturer adds, generally, to the value of the materials which he works upon, that of his own maintenance, and of his master's profit. The labour of a menial servant, on the contrary, adds to the value of nothing. Though the manufacturer has his wages advanced to him by his master, he, in reality, costs him no expence, the value of those wages being generally restored, together with a profit, in the improved value of the subject upon which his labour is bestowed. But the maintenance of a menial servant never is restored. A man grows rich by employing a multitude of manufacturers: he grows poor by maintaining a multitude of menial servants.*45 The labour of the latter, however, has its value, and deserves its reward as well as that of the former. But the labour of the manufacturer fixes and realizes itself in some particular subject or vendible commodity, which lasts for some time at least after that labour is past. It is, as it were, a certain quantity of labour stocked and stored up to be employed, if necessary, upon some other occasion. That subject, or what is the same thing, the price of that subject, can afterwards, if necessary, put into motion a quantity of labour equal to that which had originally produced it. The labour of the menial servant, on the contrary, does not fix or realize itself in any particular subject or vendible commodity. His services generally perish in the very instant of their performance, and seldom leave any trace or value behind them for which an equal quantity of service could afterwards be procured.

II.3.1
The labour of some of the most respectable orders in the society is, like that of menial servants, unproductive of any value, and does not fix or realize itself in any permanent subject; or vendible commodity, which endures after that labour is past, and for which an equal quantity of labour could afterwards be procured. The sovereign, for example, with all the officers both of justice and war who serve under him, the whole army and navy, are unproductive labourers. They are the servants of the public, and are maintained by a part of the annual produce of the industry of other people. Their service, how honourable, how useful,*46 or how necessary soever, produces nothing for which an equal quantity of service can afterwards be procured. The protection, security, and defence of the commonwealth, the effect of their labour this year will not purchase its protection, security, and defence for the year to come. In the same class must be ranked, some both of the gravest and most important, and some of the most frivolous professions: churchmen, lawyers, physicians, men of letters of all kinds; players, buffoons, musicians, opera-singers, opera-dancers, &c. The labour of the meanest of these has a certain value, regulated by the very same principles which regulate that of every other sort of labour; and that of the n oblest and most useful, 50 produces nothing which could afterwards purchase or procure an equal quantity of labour. Like the declamation of the actor, the harangue of the orator, or the tune of the musician, the work of all of them perishes in the very instant of its production.

II.3.2
Both productive and unproductive labourers, and those who do not labour at all, are all equally maintained by the annual produce of the land and labour of the country. This produce, how great soever, can never be infinite, but must have certain limits. According, therefore, as a smaller or greater proportion of it is in any one year employed in maintaining unproductive hands, the more in the one case and the less in the other will remain for the productive, and the next year's produce will be greater or smaller accordingly; the whole annual produce, if we except the spontaneous productions of the earth, being the effect of productive labour.

And on and on he goes...

[shanek]

As great as Adam Smith was, don't you think we might have learned just a little something else about economics in the last 200 years?

[DavidJames]

"As great as Adam Smith was, don't you think we might have learned just a little something else about economics in the last 200 years?"

If you would agree that we might have learned just a little something else about widespread access to guns in the last 200 years ;)

[shanek]

Originally posted by DavidJames
If you would agree that we might have learned just a little something else about widespread access to guns in the last 200 years ;)

Of course we have. And what we have learned is that guns really do make us safer.

I was debating starting a thread on this, but it would just lead to the same old same old...but since you brought it up, here is a link to CNN's list of America's most dangerous jobs. (http://money.cnn.com/2003/10/13/pf/dangerousjobs/index.htm?cnn=yes) Notice that the 5th most dangerous job, behind timber cutters, fishers, pilots and navigators, and structural metal workers, is "driver-sales workers." In other words, professions such as pizza delivery. That's a greater risk than even the police. There are countless stories through the news media of pizza deliverers getting killed in the line of duty, and since they're disarmed there's nothing they can do about it.

So, given the dangers of their profession, why shouldn't they have the right to arm themselves?

[Malachi151]

Originally posted by shanek
As great as Adam Smith was, don't you think we might have learned just a little something else about economics in the last 200 years?

LOL, seriously a joke :p

[DavidJames]

"what we have learned is that guns really do make us safer."

Please start another tread with that title and provide evidence of this. I'm not talking surveys, I'm talking statistics from official (or at least neutral) sources.

[Earthborn]

Originally posted by shanek
In other words, professions such as pizza delivery. That's a greater risk than even the police.From the article:Traffic accidents contributed heavily to their high fatality rate of 38 per 100,000, but they also suffered from crime; nearly a quarter of their deaths came from robberies and assaults.So 9 or 10 of them out of 100 000 was killed by criminals. How does that compare to police officers?

Or are you saying that guns protect against traffic accidents as well? :p